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The parties herein agree that the publication of TAT was not
substantially related to petitioner's tax-exempt purpose, and
(absent qualification of the payments petitioner received as
royalties) petitioner concedes that the $876,697 received from
BWW during the years in issue is to be treated as unrelated
business taxable income.
Whether payments are to be treated as royalties is to be
determined from all of the facts and circumstances of each case.
See sec. 1.512(b)-1, Income Tax Regs.
In Fraternal Order of Police v. Commissioner, supra, a
fraternal police organization contracted with a publishing
company to publish its official magazine. The police
organization could prepare editorials and articles for the
magazine, and the police organization could control and had final
authority over the editorial content, the sale of advertising,
the reprinting of the magazine, and the bank account into which
advertising sales proceeds were deposited, a percentage of which
the organization received. The police organization also could
appoint the magazine's executive editor.
This Court and the Court of Appeals for the Seventh Circuit
concluded that the organization took an active role in the
publication of the magazine and that the payments received from
the publishing company did not qualify as excludable royalties
under section 512(b)(2).
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