T.C. Memo. 1999-75
UNITED STATES TAX COURT
EDUCATION ATHLETIC ASSOCIATION, INC., Petitioner
v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6396-98X. Filed March 10, 1999.
E is an entity exempt from Federal income tax under
sec. 501(a), I.R.C., as an organization described in sec.
501(c)(3), I.R.C. E's exempt activity involves primarily
the promoting of athletic education. On its Form 1023,
Application for Recognition of Exemption, E checked sec.
509(a)(2), I.R.C., as the reason it was not a private
foundation. E's sole source of income for the 1993,
1994, and 1995 years was from the sale of pickle cards, a
game of chance authorized by Nebraska statute. E paid and
reported unrelated business income tax for 1993. When E
transmitted its Forms 990-T, Exempt Organization Business
Income Tax Return, for the years 1993, 1994, and 1995, E
enclosed a check and attached a letter stating that the
check was being delivered as an offer in settlement of R's
audit of E's 1993 taxable year. R cashed the check.
Subsequently, R determined that E did not meet the exception
requirements of sec. 509(a)(2), I.R.C., and was therefore a
private foundation.
1. Held: the sale of pickle cards is an unrelated
trade or business and income generated therefrom constitutes
unrelated business taxable income to E. See secs. 512(a),
513(a), I.R.C.; Secs. 1.513-1(a) through (d), Income Tax.
Regs.
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