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property to obtain a royalty, renders the payment for the use of
that right UBTI and not a royalty." Sierra Club, Inc. v.
Commissioner, 86 F.3d at 1536. Accordingly, in the instant case,
we carefully scrutinize the activities of each of the parties
compensated in the list rental transaction to ascertain whether
they are undertaken to exploit or protect petitioner's list.
Hereinafter, we refer to activities which are undertaken to
exploit or protect the list as royalty-related activities.
The List Manager
In a list rental transaction, the list manager's activities
include: (1) Promoting list rental transactions involving
petitioner's rental list via advertising, distribution of data
cards, solicitations, and personal sales calls directed at list
brokers and potential customers; (2) forwarding the list rental
order to CMS for approval; (3) arranging with Triplex to fill the
order; (4) billing the mailer or the mailer's list broker; (5)
paying Triplex the amounts it is owed; and (6) remitting payment
to CMS.
In the context of the list rental transaction, a list owner
has certain intangible information regarding the individuals and
entities whose names and addresses appear on its list.
Specifically, the list owner knows that such individuals and
entities are responsive to direct mail and willing to support
certain tax-exempt organizations. To exploit that knowledge, the
list owner must first let others know that the list is available.
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