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Upon a conclusion that relevant facts reveal private
benefit, the organization will not qualify as operating primarily
for exempt purposes “absent a showing that no more than an
insubstantial part of its activities further the private
interests or any other nonexempt purposes.” Am. Campaign Acad.
v. Commissioner, 92 T.C. at 1066.
II. Contentions of the Parties
Respondent contends that petitioner’s status as an
organization exempt from tax under section 501(c)(3) should be
revoked. It is respondent’s position that petitioner fails the
operational test imposed pursuant to section 1.501(c)(3)-1(c),
Income Tax Regs., on grounds that the school was operated to
benefit private interests of Ms. Fennell and that part of its net
earnings inured to her benefit. Respondent relies on the
evidentiary record compiled throughout this proceeding and also
argues, as set forth in an amendment to answer, that the doctrine
of collateral estoppel applies to preclude petitioner from
relitigating questions of fact central to the instant dispute.
Conversely, petitioner asserts that it satisfies the
operational test, operating for public interest as an educational
facility. Petitioner further denies the existence of inurement
for personal gain or private interests. With respect to
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