Michael T. Caracci and Cindy W. Caracci, et al. - Page 61




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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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