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exempt entity, the sale constitutes inurement and revocation may
be appropriate. Anclote Psychiatric Ctr., Inc. v. Commissioner,
T.C. Memo. 1998-273.
With the enactment of section 4958, however, the issue
whether the tax-exempt status of the Sta-Home tax-exempt entities
should be revoked must now be considered in the context of the
“intermediate sanction” provisions. As noted above, the
intermediate sanction regime was enacted in order to provide a
less drastic deterrent to the misuse of a charity than revocation
of that charity’s exempt status. The legislative history
explains that “the intermediate sanctions for ‘excess benefit
transactions’ may be imposed by the IRS in lieu of (or in
addition to) revocation of an organization’s tax-exempt status.”
H. Rept. 104-506, supra at 59, 1996-3 C.B. at 107. A footnote to
this statement explains: “In general, the intermediate sanctions
are the sole sanction imposed in those cases in which the excess
benefit does not rise to a level where it calls into question
whether, on the whole, the organization functions as a charitable
or other tax-exempt organization”. Id. n.15, 1996-3 C.B. at 107.
Although the imposition of section 4958 excise taxes as a result
of an excess benefit transaction does not preclude revocation of
the organization’s tax-exempt status, the legislative history
indicates that both a revocation and the imposition of
intermediate sanctions will be an unusual case.
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