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June 6, 1996. Petitioner appealed to the Internal Revenue
Service Office of Appeals, which gave a final adverse
determination on July 1, 1998, denying tax-exempt status to
petitioner under section 501(c)(3). Respondent's reasons for
denial stemmed from his conclusion that petitioner is not
operated exclusively for exempt purposes, in that a substantial
portion of the purposes and activities of petitioner is social
and recreational and inconsistent with the section 501(c)(3)
exemption. Petitioner challenges that finding in this action for
declaratory judgment.
Discussion
Petitioner bears the burden of proving that it is a section
501(c)(3) organization. Rule 217(c)(2)(A). A statute creating
an exemption must be strictly construed. See American Auto.
Association v. Commissioner, 19 T.C. 1146, 1158 (1953);
Associated Indus. of Cleveland v. Commissioner, 7 T.C. 1449, 1464
(1946).
Section 501(a) provides tax-exempt status for organizations
described in section 501(c). Section 501(c)(3) includes the
following organizations:
(c)(3) Corporations, and any community chest,
fund, or foundation, organized and operated
exclusively for religious, charitable, scientific,
testing for public safety, literary, or
educational purposes, or to foster national or
international amateur sports competition (but only
if no part of its activities involve the provision
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