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for use in lieu of the 15-year term instrument and incorporating
reference to mortgage security and protection against other
liens.
By letter dated December 18, 2000, respondent issued a final
adverse ruling regarding petitioner’s status as a private
foundation. The letter stated:
This ruling is made for the following reason(s):
You fail to meet the “attentiveness test” under
the integral part test found under section 1.509(a)-
4(i)(3)(iii) of the Income Tax Regulations.
You fail to meet the test for control by
disqualified persons set forth in section 1.509(a)-
4(j)(1) of the Regulations. Your primary asset is a
promissory note secured by assets of a corporation
controlled by disqualified persons and the income of
which is payable by that same corporation.
Disqualified persons are in a position to control you
by means of the power they exercise, through their
corporation, with respect to your primary asset.
Discussion
I. General Rules
Section 509(a) defines a private foundation as any
organization described in section 501(c)(3) except those excluded
under section 509(a)(1) through (4). Paragraphs (1) and (2) of
section 509(a) detail what are referred to as publicly supported
entities, sec. 1.509(a)-4(a)(5), Income Tax Regs., and encompass
religious, educational, medical, and governmental entities and
institutions which receive substantial public support. Paragraph
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