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‘est’ for 2 years after terminating their relationship with ‘est’
organizations.
In est of Hawaii v. Commissioner, supra at 1080, this Court
agreed with respondent that the nonprofit was “part of a
franchise system which is operated for private benefit and * * *
its affiliation with this system taints it with a substantial
commercial purpose.” We found that the “ultimate beneficiaries”
of the nonprofit’s activities were the for-profit corporations,
and that the nonprofit “was simply the instrument to subsidize
the for-profit corporations and not vice versa”. Id. at 1082.
This Court held that the nonprofit was not operated exclusively
for exempt purposes. See also Harding Hosp., Inc. v. United
States, 505 F.2d 1068 (6th Cir. 1974) (impermissible private
benefit resulted from a nonprofit hospital's contract with a
physician group, giving them a virtual monopoly over care of the
hospital's patients and the income stream they represented, and
providing the physician group with fees for supervising the
hospital's medical staff); Sonora Community Hosp. v.
Commissioner, 46 T.C. 519 (1966) (impermissible private benefit
resulted from an arrangement whereby a for-profit laboratory was
permitted to occupy space in the nonprofit hospital rent-free,
and paid the hospital’s founding doctors a share of the
laboratory’s gross revenues in consideration of patient referrals
and administrative services), affd. 397 F.2d 814 (9th Cir. 1968).
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