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In the notice of deficiency, respondent calculated petitioner's
taxable income as follows:
1984 1985 1986 1987 1988
Gross income $592,299 $453,356 $308,705 $245,814 $329,843
Operating expense (159,309) (137,236) (77,449) (83,021) (105,367)
Charitable (43,299) (31,612) (23,126) (16,279) (22,448)
contributions
Total $389,691 $284,508 $208,130 $146,514 $202,028
In determining petitioner's taxable income, respondent disallowed
the deductions reflected on petitioner's Forms 990 for assistance
to individuals and payments to the FPCF. Respondent treated
petitioner's grants to organizations as charitable contributions
but limited those deductions to 10 percent of taxable income.
OPINION
Section 501(c)(3) requires, among other things, that an
organization be operated exclusively for one or more specified
purposes and that no part of the net earnings of the organization
"inures to the benefit of any private shareholder or individual".
See also sec. 1.501(c)(3)-1(c)(1), Income Tax Regs. An
organization is not operated exclusively for an exempt purpose
unless it serves a public rather than a private interest. Sec.
1.501(c)(3)-1(d)(1)(ii), Income Tax Regs. An organization is not
operated exclusively for one or more exempt purposes if its net
earnings inure in whole or in part to the benefit of private
shareholders or individuals. Sec. 1.501(c)(3)-1(c)(2), Income
Tax Regs. The words "private shareholder or individual" refer to
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