Arkansas State Police Association, Inc. - Page 11




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               Petitioner's participation in the publication of its own               
          official magazine was not passive or de minimis.  TAT represented           
          not the magazine of BWW but the magazine of petitioner through              
          which petitioner promoted and actively sought not just to                   
          capitalize on the value of its name but to carry out its                    
          organizational purposes and objectives, which were stated in the            
          Fall-1995 edition of TAT as follows:                                        

               to more effectively communicate between members of this                
               department so as to encourage collective input and                     
               participation in short-term and long range goals of the                
               Arkansas State Police.                                                 

               The $876,697 petitioner received from BWW as petitioner's              
          share of TAT advertising proceeds does not reflect royalty                  
          income.  The payments are to be treated as unrelated business               
          taxable income.                                                             
               When tax-exempt organizations such as petitioner receive               
          income from an unrelated trade or business of $1,000 or more,               
          they are required to file Form 990-T, Exempt Organization                   
          Business Income Tax Return.  See sec. 1.6012-2(e), Income Tax               
          Regs.                                                                       
               Section 6651(a)(1) provides for an addition to tax unless              
          the failure to file required tax returns is due to reasonable               
          cause and not due to willful neglect.  The present case involves            
          close questions of fact and law that have been extensively                  
          litigated.   We do not sustain respondent's additions to tax.               





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