Exempt organizations - Uncle Fed's Tax*Board

220.40 Employees’ trust; debt-financed securities;
leveraged ESOP. Employer securities purchased
with borrowed funds by a qualified trust
forming part of a leveraged employee stock ownership
plan that satisfies the requirements of section
4975(e)(7) are not debt-financed property
within the meaning of section 514(b), and dividends
and interest earned on such securities are
not unrelated business taxable income to the trust.
Rev. Ruls. 71–311 and 74-197 distinguished.
§§1.401-1, 1.511-2, 1.512(b)-1, 1.513-1,
1.514(b)-1, 54.4975-1. (Secs. 401, 511, 512, 513,
514, 4975; ’86 Code.)
Rev. Rul. 79-122, 1979-1 C.B. 204.
220.41 Employees’ trust; installment notes
purchased from employer. The passive receipt of
income by an exempt employees’ trust from
installment notes bought from the employer-settlor
is not unrelated business taxable income.
§§1.512(a)-1, 1.513-1. (Secs. 512, 513; ’86
Code.)
Rev. Rul. 69-574, 1969-2 C.B. 130.
220.42 Employees’ trust; interest and service
fees on mortgage loans. Interest income earned
by an exempt employees trust from mortgage
loans, which form a significant portion of the
trusts’ assets, does not enter into the computation
of unrelated business taxable income under section
512. Service fee receipts earned by the trust in
connection with such loans, however, do enter into
the computation. §§1.401-1, 1.511-2,
1.512(b)-1, 1.513-1. (Secs. 401, 511, 512, 513;
’86 Code.)
Rev. Rul. 79-349, 1979-2 C.B. 233.
220.43 Employees’ trust; lease of railroad
tank cars. The trustee of an exempt employees’
trust purchased railroad tank cars in the name of
the trust and leased them to an industrial company
for a period of years. The trustee’s sole activity
with respect to this venture is to receive the periodic
rental income, the lessee having the responsibility
of maintaining and operating the tank cars.
The trust is subject to tax on the rental income as
unrelated business taxable income. §1.512(a)-1,
1.513-1. (Secs. 512, 513; ’86 Code.)
Rev. Rul. 60-206, 1960-1 C.B. 201.
220.44 Employees’ trust; limited partnership.
The investment of an exempt employees’
trust as a limited partner in a partnership carrying
on an unrelated trade or business may result in
unrelated business taxable income within the
meaning of section 512. §§1.511–2, 1.512(c)–1,
1.513-1. (Secs. 511, 512, 513; ’86 Code.)
Rev. Rul. 79-222, 1979-2 C.B. 236.
220.45 Employees’ trust; real estate investment
trust distributions. Amounts distributed by
a real estate investment trust, within the meaning
of section 856, to an exempt employees’ pension
trust do not constitute unrelated business taxable
income and are dividends where the distributions
were made out of the earnings and profits of the
real estate investment trust. §1.512(b)–1. (Sec.
512, ’86 Code.)
Rev. Rul. 66-106, 1966-1 C.B. 151.
220.46 Farm bureau; sale of supplies. A
county-wide organization engaged in the
advancement and improvement of agriculture
may be considered to be tax exempt. Any income
it receives from the sale of supplies and equipment
to members, however, is taxable as unrelated business
income. (Sec. 501, ’86 Code.)
Rev. Rul. 57-466, 1957–2 C.B. 311.
220.47 Gross receipts from nonmembers;
social clubs; information returns. Guidelines
are set forth for determining the effect of gross
receipts derived from nonmember use of a social
club’s facilities on the club’s exempt status in the
examination of annual information returns, Forms
990 and 990T. Recordkeeping requirements when
nonmembers use a club’s facilities and circumstances
under which a host-guest relationship will
be assumed are set forth. Rev. Proc. 64-36 superseded.
§§1.501(c)(7)-1, 1.512(a)-1. (Sec.
601.105, S.P.R.; Secs. 501, 512, ’86 Code.)
Rev. Proc. 71-17, 1971-1 C.B. 683.
220.48 Halfway house operating furniture
shop. A halfway house, organized to provide
room, board, therapy, and counseling for persons
discharged from alcoholic treatment centers,
which also operates a furniture shop to provide
full-time employment for its residents with any
profits applied to operating costs of the halfway
house, qualifies for exemption and is not conducting
an unrelated trade or business.
§§1.501(c)(3)-1, 1.513-1. (Secs. 501, 513; ’86
Code.)
Rev. Rul. 75-472, 1975-2 C.B. 208.
220.49 Health club. The operation of health
club facilities in a commercial manner by an
exempt organization whose purpose is to provide
for the welfare of young people, constitutes unrelated
trade or business. §§1.501(c)(3)-1, 1.513-1.
(Secs. 501, 513; ’86 Code.)
Rev. Rul. 79-360, 1979-2 C.B. 236.
220.50 Hospital; cafeteria and coffee shop.
The operation of a cafeteria and coffee shop by a
section 501(c)(3) hospital does not constitute
unrelated trade or business. §§1.501(c)(3)-1,
1.513-1. (Secs. 501, 513; ’86 Code.)
Rev. Rul. 69–268, 1969-1 C.B. 160.
220.51 Hospital; gift shop. The operation of a
gift shop, patronized by patients, visitors making
purchases for patients, and hospital employees, by
a section 501(c)(3) hospital does not constitute
unrelated trade or business. §§1.501(c)(3)–1,
1.513-1. (Secs. 501, 513; ’86 Code.)
Rev. Rul. 69-267, 1969-1 C.B. 160.
220.52 Hospital; hearing aid sales. The sale of
hearing aids to its patients by an exempt hospital
whose primary activity is rehabilitating the handicapped,
including those with hearing deficiencies,
does not constitute unrelated trade or business
under section 513. §§1.501(c)(3)-1, 1.513–1.
(Secs. 501, 513; ’86 Code.)
Rev. Rul. 78-435, 1978-2 C.B. 181.
220.53 Hospital; laboratory services for private
patients of staff physicians. The Service
will not follow that portion of the decision in St.
Luke's Hospital of Kansas City v. U.S. that held
that a tax exempt hospital’s performance of laboratory
testing upon referred specimens from private
patients of the hospital’s staff physicians is
not unrelated trade or business because the services
were performed for the convenience of the
hospital’s members. The Service disagrees with
the court’s characterization of staff physicians as
members of the hospital. §§1.501(c)(3)–1,
1.513-1. (Secs. 501, 513; ’86 Code.)
Rev. Rul. 85-109, 1985-2 C.B. 165.
220.54 Hospital; laboratory services for private
patients of staff physicians. The performance
of diagnostic laboratory testing on referred
specimens from private patients of hospital staff
physicians, by a hospital exempt under section
501(c)(3) is unrelated trade or business if such services
are otherwise available in the community.
§§1.501(c)(3)-1, 1.513-1, 1.6001-1, 1.6033-2.
(Secs. 501, 513, 6001, 6033; ’86 Code.)
Rev. Rul. 85-110, 1985-2 C.B. 166.
220.55 Hospital; office building leased to
medical group. The leasing of its adjacent office
building, and the furnishing of certain office services,
by an exempt hospital to a hospital-based
medical group is not unrelated trade or business.
§§1.501(c)(3)-1, 1.513-1. (Secs. 501, 513; ’86
Code.)
Rev. Rul. 69-463, 1969-2 C.B. 131.
Exempt organizations
220.56 Hospital; office space leased to medical
staff. Leases of office space by an exempt hospital
to members of its medical staff, who contribute
importantly to the performance of hospital
functions, are not considered business leases.
§§1.501(c)(3)-1, 1.514(b)-1. (Secs. 501, 514; ’86
Code.)
Rev. Rul. 69-464, 1969-2 C.B. 132.
220.57 Hospital; parking lot. The operation of
a parking lot by a section 501(c)(3) hospital does
not constitute unrelated trade or business.
§§1.501(c)(3)-1, 1.513-1. (Secs. 501, 513; ’86
Code.)
Rev. Rul. 69–269, 1969–1 C.B. 160.
220.58 Hospital; pharmacy sales; general
public. Circumstances are set forth in which the
sale of pharmaceutical supplies to the general public
by the pharmacy of a hospital exempt under
section 501(c)(3) results in unrelated business taxable
income. §§1.501(c)(3)-1, 1.512(a)-1,
1.513-1. (Secs. 501, 512, 513; ’86 Code.)
Rev. Rul. 68-374, 1968-2 C.B. 242.
220.59 Hospital; pharmacy sales; hospital
patients. Situations are set forth in which persons
who purchase pharmaceutical supplies from the
pharmacy of a hospital exempt under section
501(c)(3) are considered “patients” of the hospital
within the meaning of section 513(a)(2).
§§1.501(c)(3)-1, 1.513-1. (Secs. 501, 513; ’86
Code.)
Rev. Rul. 68-376, 1968-2 C.B. 246.
220.60 Hospital; pharmacy sales; private
patients of physicians. A hospital exempt under
section 501(c)(3) operates a pharmacy in a medical
office building. Pharmaceutical supplies are
sold to the private patients of physicians practicing
medicine in the building. These sales constitute
unrelated business income. §§1.501(c)(3)–1,
1.513-1. (Secs. 501, 513; ’86 Code.)
Rev. Rul. 68-375, 1968–2 C.B. 245.
220.61 Housing consultant service. The performance
for a fee of consulting services to aid
minority group employees in obtaining housing
does not constitute unrelated trade or business of
an exempt organization that promotes compliance
with fair housing laws. §1.513–1. (Sec. 513, ’86
Code.)
Rev. Rul. 68-225, 1968-1 C.B. 283.
220.62 Insurance board. The handling of an
insurance program for a municipal board of education
and the receipt of brokerage commissions
which are required to be deposited in a special
fund for public purposes does not affect the
exempt status of an insurance board. Further, such
activity is not considered an unrelated trade or
business and brokerage commissions allocated to
the special fund are not unrelated business
income. (Sec. 511, ’86 Code.)
Rev. Rul. 56-152, 1956–1 C.B. 56.
220.63 Interest on obligations of a State;
social club. Interest on obligations of a State
received by an exempt social club is not included
in computing unrelated business taxable income.
§1.512(a)-1. (Sec. 512, ’86 Code.)
Rev. Rul. 76-337, 1976-2 C.B. 177.
220.64 Labor organization; accounting and
tax service. An exempt labor organization is subject
to tax on unrelated business income with
respect to income derived from the performance of
accounting and tax services for certain of its members.
§1.511-2. (Sec. 511, ’86 Code.)
Rev. Rul. 62–191, 1962–2 C.B. 146.
220.65 Lease of pipeline system. Income
derived by an exempt organization from the lease
of a pipeline system, consisting of right-of-way
interests in land, pipelines buried in the ground,
pumping stations, plants, equipment, and other
appurtenant properties, constitutes rent from real