Salvation Navy, Inc. - Page 6

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          unrelated individuals selected from the community which SNI                 
          serves.  According to the IRS, this request for modification was            
          made to ensure that SNI would serve the interests of the public,            
          rather than the interests of a particular individual.  Valfer               
          refused the IRS request, stating that he does not trust any Board           
          of Directors that might vote him out of the Salvation Navy, Inc.            
               On June 16, 2000, the IRS issued an initial adverse                    
          determination letter to SNI.  SNI appealed to the IRS Office of             
          Appeals, which issued to SNI a final adverse determination on               
          April 4, 2001, denying tax-exempt status to SNI under section               
               Petitioner SNI bears the burden of proving that it is a                
          section 501(c)(3) organization.  See Rule 217(c)(2)(A).  In order           
          to meet this burden, SNI must show that the administrative record           
          contains sufficient evidence to overcome the grounds stated in              
          the notice of final adverse determination.  See Nationalist                 
          Movement v. Commissioner, 102 T.C. 558, 572 (1994), affd. 37 F.3d           
          216 (5th Cir. 1994); At Cost Servs., Inc. v. Commissioner, T.C.             
          Memo. 2000-329.  The following reason was given in the Notice:              
               Your organization is not organized or operated                         
               exclusively for charitable purposes.  Additionally,                    
               part of the net earnings of your organization inure to                 
               the benefit of a private individual.                                   
               Section 501(a) provides tax-exempt status for organizations            
          described in section 501(c).  Section 501(c)(3) includes                    
          “Corporations, and any community chest, fund, or foundation,                

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