Common Cause - Page 16




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          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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