17
Further, the Club's beano license could be revoked if
petitioner were to violate the donation requirement of the
Massachusetts Beano Law. Accordingly, obtaining the
assurance that its license would not be revoked for failure
to comply with that requirement was itself a quid pro quo
for the donations. * * *
Id. at 176. The Court held that the donations "were clearly
necessary, in the strict sense of the word, to the lawful conduct
of beano games by petitioner since they were required by
Massachusetts law as a condition to the retention of its license
to operate such games." Id. at 177. The donations were held to
be currently deductible as ordinary and necessary expenses under
section 162 "in the nature of an annually recurring license
expense." Id. The taxpayer was allowed a deduction under
section 512(a) for the entire amount of donations paid.
Respondent argues that South End Italian Independent Club,
Inc. v. Commissioner, supra, is distinguishable based upon the
Massachusetts regulations. Respondent argues that it appears
that the Court interpreted Massachusetts law as requiring the
taxpayer to distribute its entire net proceeds for lawful
purposes on an annual basis in order to retain its bingo
license.9 For support, respondent construes the regulations,
Mass. Regs. Code tit. 961, sec. 3.05(3)(a)(3)(1980), as providing
that the balance of unexpended net proceeds in an organization's
9 As a factual matter, there is some indication that the
taxpayer in South End Italian Independent Club, Inc. v.
Commissioner, 87 T.C. 168 (1986), did not distribute its entire
net proceeds on an annual basis. See id. at 171 & n.3.
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