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Commissioner, 86 F.3d 1526, 1531 (9th Cir. 1996), affg. T.C.
Memo. 1993-199 and revg. on another issue 103 T.C. 307 (1994);
Disabled Am. Veterans v. Commissioner, 94 T.C. 60, 76 (1990) (DAV
II), revd. on other grounds 942 F.2d 309 (6th Cir. 1991).
Neither the Code nor the regulations define the term
"royalty" for UBIT purposes. Instead, section 1.512(b)-1, Income
Tax Regs., provides that "Whether a particular item of income
falls within any of the modifications provided in section 512(b)
shall be determined by all the facts and circumstances of each
case." Petitioner bears the burden of proving that the list
rental payments are royalties that are excluded from UBTI
pursuant to section 512(b)(2). See Rule 142(a).
In the instant case, respondent contends that, in each of
the list rental transactions, the mailer's entire payment
(including the amounts paid to the list brokers, list manager,
CMS, and Triplex) constitutes UBTI to petitioner because
petitioner regularly carries on a list rental business that is
not substantially related to its exempt purpose. In that regard,
respondent contends that the list brokers, list manager, CMS, and
Triplex are petitioner's agents for the purpose of carrying on
the list rental business. Petitioner disputes respondent's
5(...continued)
production or by gross or taxable
income from the property, and all
deductions directly connected with
such income.
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