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III. Petitioner’s Claim to Exemption on a “Stand-Alone” Basis
Applying the principles described above, we next consider
whether petitioner has established that respondent improperly
denied it tax-exempt status as a section 501(c)(3) organization.
A. The Relevance of Control--The Parties’ Positions
Respondent asserts that petitioner has ceded effective
control over its sole activity--participating as a co-general
partner with for-profit parties in the partnerships that own and
operate the Surgery Center--to the for-profit partners and the
for-profit management company that is an affiliate of
petitioner’s co-general partner. Respondent asserts that this
arrangement is indicative of a substantial nonexempt purpose,
whereby petitioner impermissibly benefits private interests.
Without conceding that private parties control its
activities, petitioner challenges the premise that the ability to
control its activities determines its purposes. Petitioner
argues that under the operational test, “the critical issue in
determining whether an organization’s purposes are noncharitable
is not whether a for profit or not for profit entity has control.
Rather, the critical issue is the sort of conduct in which the
organization is actually engaged.” On brief, the parties agree
that under an aggregate theory of partnership taxation, the
partnerships’ activities are considered petitioner’s own
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