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disagree as to whether the presence of any compensation for goods
and services in the list rental payment precludes royalty
treatment, pursuant to section 512(b)(2), for any portion of the
list rental payment. The issue has been the subject of much
litigation. See Disabled Am. Veterans v. United States, 227 Ct.
Cl. 474, 650 F.2d 1178 (1981) (DAV I), affd. after remand 704
F.2d 1570 (Fed. Cir. 1983); Disabled Am. Veterans v.
Commissioner, supra; Sierra Club, Inc. v. Commissioner, T.C.
Memo. 1993-199. We discuss each of those cases in more detail
below.
Earlier Cases
Disabled American Veterans
In DAV I, the exempt organization engaged in the rental of
its mailing list, but, unlike petitioner, the organization itself
performed all of the list management and list fulfillment
functions. On the question of whether the list rental payments
were royalties, the Court of Claims concluded that the list
rentals "[were] the product of extensive business activity by DAV
and [did] not fit within the types of 'passive' income set forth
in section 512(b)." Disabled Am. Veterans v. United States, 650
F.2d at 1189. The court found that the payments were more akin
to rent from the use of personal property than to royalties, and
held that the income from the transaction was not excluded from
UBTI under section 512(b). See id. at 1189-1190.
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