- 16 -
178, supra, we concluded that there is no distinction between
active and passive royalties for section 512(b)(2) purposes. See
Disabled Am. Veterans v. Commissioner, supra at 75. We also made
it clear that we could distinguish payments for the use of an
intangible, which constitute a royalty, from payments for
advertising, compensation for services, or other profits
masquerading as royalties. See id. at 77. The Court of Appeals
for the Sixth Circuit, reversing the decision of this Court, held
that the issuance of Rev. Rul. 81-178, supra, was not a
sufficient change of legal climate to preclude collateral
estoppel. See Disabled Am. Veterans v. Commissioner, 942 F.2d at
314.
Sierra Club
The issue of whether income from a mailing list transaction
is UBTI arose again in Sierra Club, Inc. v. Commissioner, T.C.
Memo. 1993-199. Unlike the exempt organization in DAV I and DAV
II, the exempt organization in Sierra Club did not itself perform
any of the list management or list fulfillment functions.
Rather, as in the instant case, a professional list manager
performed all list management functions, and a computer house
performed all list fulfillment functions. On cross-motions for
summary judgment, we held that the payment received by the exempt
organization was, at least in part, a royalty. We rejected the
Commissioner's argument that royalties, in the context of section
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