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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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