Exempt organizations - Uncle Fed's Tax*Board

accommodations, primarily to people under age
25, by an exempt organization whose purpose is to
provide for the welfare of young people is substantially
related to the purpose constituting the basis
for the organization’s exemption and does not
constitute an unrelated trade or business.
§§1.501(c)(3)-1, 1.513-1. (Secs. 501, 513; ’86
Code.)
Rev. Rul. 76-33, 1976-1 C.B. 169.
220.89 Research. Income derived from
research by a tax-exempt college, university, or
hospital, or by a tax-exempt organization operated
primarily for the purpose of carrying on fundamental
research, does not constitute income from
an unrelated trade or business. Income derived by
any organization to which Supplement U is applicable
from research for the U.S. or any of its agencies
or for a State or political subdivision thereof
is not income from an unrelated trade or business.
§§39.101(6)-1, 39.421–1, 39.422–1. (Secs.
101(6), 421, 422, ’39 Code; Secs. 501, 511, 512,
’86 Code.)
Rev. Rul. 54-73, 1954-1 C.B. 160.
220.90 Research; commercially sponsored.
Commercially sponsored research otherwise qualifying
as scientific research under section
501(c)(3), the results of which, including all relevant
information, are timely published in such
form as to be available to the interested public,
constitutes scientific research carried on in the
public interest. Research, the publication of which
is withheld or delayed significantly beyond the
time reasonably necessary to establish ownership
rights, however, is not in the public interest and
constitutes the conduct of unrelated trade or business.
§§1.501(c)(3)–1, 1.513–1. (Secs. 501, 513;
’86 Code.)
Rev. Rul. 76-296, 1976-2 C.B. 141.
220.91 Research foundation; medical. An
exempt organization conducting and supporting
medical research will be taxed on income from
enterprises which, operated along the lines of
commercial undertakings, produce income which
is disproportionate when compared to the size and
extent of the exempt activities. (Secs. 511, 513;
’86 Code.)
Rev. Rul. 57-313, 1957-2 C.B. 316.
220.92 Retail grocery store. An exempt organization’s
operation of a retail grocery store as part
of its therapeutic program for emotionally disturbed
adolescents, almost fully staffed by the
adolescents, and on a scale no larger than is reasonably
necessary for the performance of the organization’s
exempt functions, is not unrelated trade
or business. Rev. Rul. 73–127 distinguished.
§1.513-1. (Sec. 513, ’86 Code.)
Rev. Rul. 76-94, 1976-1 C.B. 171.
220.93 Revocation of exemption. An organization
whose exemption from tax under section
501(a) is revoked prospectively under the authority
of section 7805(b) is subject to the unrelated
business income tax for the period covered by section
7805(b) relief. §§1.511–2, 301.7805–1.
(Secs. 511, 7805; ’86 Code.)
Rev. Rul. 78-289, 1978-2 C.B. 180.
220.94 Royalties; beneficial owner of patents.
Amounts received from licensees by an exempt
organization, the legal and beneficial owner of
patents assigned to it by inventors for specified
percentages of future royalties, constitute royalty
income that is excludable in computing unrelated
business taxable income. Rev. Rul. 73–193 distinguished.
§1.512(b)-1. (Sec. 512, ’86 Code.)
Rev. Rul. 76-297, 1976-2 C.B. 178.
220.95 Royalties; endorsement of business
products and services by labor organization.
Payments an exempt labor organization receives
from various business enterprises for the use of the
organization’s trademark and similar properties
are royalties within the meaning of section
512(b)(2) and are not taken into account in determining
unrelated taxable income. However, payments
the organization receives for personal
appearances and interviews by its members are not
royalties but are compensation for personal services
and must be taken into account in computing
the organization’s unrelated business taxable
income. §§1.512(b)–1, 1.513–1. (Secs. 512, 513;
’86 Code.)
Rev. Rul. 81-178, 1981–2 C.B. 135.
220.96 Royalties; patent development deductions.
Patent development and management services
fees deducted from royalties collected from
licensees by an exempt charitable organization for
distribution to beneficial owners of the patents is
not within the exception for royalties provided by
section 512(b) in determining “unrelated business
taxable income” of the organization. Distinguished
by Rev. Rul. 76-297. §1.512(b)–1. (Sec.
512, ’86 Code.)
Rev. Rul. 73-193, 1973-1 C.B. 262.
220.97 Sale of advertising. Income derived by
an exempt organization from the sale of advertising
in its annual yearbook is unrelated business
taxable income where an independent commercial
firm under a contract covering a full calendar year
conducts an intensive advertising solicitation
campaign in the organization’s name and is paid a
percentage of the gross advertising receipts for
selling the advertising, collecting from advertisers,
and printing the yearbook. Distinguished by
Rev. Rul. 75–201. §§1.512(a)-1, 1.513–1. (Secs.
512, 513; ’86 Code.)
Rev. Rul. 73-424, 1973-2 C.B. 190.
220.98 Sale of advertising. The sale of advertising
during a four-month period by the paid
employees of an exempt organization, which
raises funds for an exempt symphony orchestra
and publishes a weekly concert program distributed
free at the symphony performances over an
eight-month period, is a business regularly carried
on in determining unrelated income.
§§1.512(a)-1, 1.513-1. (Secs. 512, 513; ’86
Code.)
Rev. Rul. 75–200, 1975-1 C.B. 163.
220.99 Sale of advertising. The sale of advertising
by volunteers of an exempt organization,
which raises funds for an exempt symphony
orchestra and publishes an annual concert book
distributed at the orchestra’s annual charity ball, is
not a business regularly carried on in determining
unrelated income under section 512. Rev. Rul.
73-424 distinguished. §§1.512(a)-1, 1.513-1.
(Secs. 512, 513 ’86 Code.)
Rev. Rul. 75-201, 1975-1 C.B. 164.
220.100 Sale of membership directory. The
sale of an exempt organization of a membership
directory that contributes to the organizations purpose
and confers no private commercial benefit on
any of the members, who are the directory’s sole
purchasers, does not constitute unrelated trade or
business within the meaning of section 513. Rev.
Rul. 74-38 distinguished. §§1.501(c)(6)-1,
1.513-1. (Secs. 501, 513; ’86 Code.)
Rev. Rul. 79-370, 1979–2 C.B. 238.
220.101 Sale of space in journal. Income
derived by an association of law enforcement officials,
exempt under section 501(c)(6), from the
sale of space in its journal either for conventional
advertising or merely to identify the purchasing
organization without a further advertising message
constitutes unrelated trade or business
income. Clarified by Rev. Rul. 76-93. Distinguished
by Rev. Rul. 79-370. §1.513-1. (Sec. 513,
’86 Code.)
Rev. Rul. 74-38, 1974-1 C.B. 144.
220.102 Sale of space in journal. Income
derived by an organization, exempt under section
Exempt organizations
501(c)(3) from the sale of space in its journal for
advertising, except space for listings (60 or more
to the page) that merely identify the purchaser
without a further advertising message, constitutes
unrelated trade or business income. Rev. Rul.
74-38 clarified. §1.513–1. (Sec. 513, ’86 Code.)
Rev. Rul. 76-93, 1976-1 C.B. 170.
220.103 School; operating ski facility. An
exempt school operates a ski facility for use in its
physical education program and also for use, to a
substantial degree, for recreational purposes by
students attending the school and members of the
public who are required to pay slope and ski lift
fees comparable to nearby commercial facilities.
The recreational use of the facility by students is
substantially related to the school’s exempt purposes
and the income derived from the students’
use of the facility is not from unrelated trade or
business. However, income from use of the facility
by the public is from unrelated trade of business.
§§1.501(c)(3)-1, 1.513-1. (Secs. 501, 513; ’86
Code.)
Rev. Rul. 78-98, 1978-1 C.B. 167.
220.104 School; summer tennis camp. An
exempt school annually contracts with an individual
who conducts a 10-week summer tennis camp
with the school furnishing the tennis courts, housing,
and dining facilities and the individual hiring
the instructors, recruiting campers, and providing
supervision. The amounts received are from dual
use of facilities and personnel and an allocable
portion of expenses attributable to such facilities
and personnel may be deducted in computing
unrelated business taxable income. Amplified by
Rev. Rul. 80-297. §1.512(a)-1. (Sec. 512, ’86
Code.)
Rev. Rul. 76-402, 1976-2 C.B. 155.
220.105 School; summer tennis club. An
exempt school that uses its tennis facilities for ten
weeks in the summer as a public tennis club operated
by employees of the school’s athletic department
is engaged in unrelated trade or business, and
the income earned is not excludable from unrelated
business taxable income as rent from real
property. If the school leases the tennis facilities
for a fixed fee to an unrelated individual who operates
a tennis club for the public, the school is still
engaged in unrelated trade or business, but the
lease income is excluded from unrelated business
taxable income as rent from real property. Rev.
Rul. 76-402 amplified. §§1.512(b)-1, 1.513-1.
(Sec. 512, 513; ’86 Code.)
Rev. Rul. 80-297, 1980-2 C.B. 196.
220.106 Senior citizens’ center; beauty shop
and barber shop. The operation of a beauty shop
and a barber shop by an exempt senior citizens’
center for use by senior citizens is not unrelated
trade or business. §§1.501(c)(3)-1, 1.513–1.
(Secs. 501, 513; ’86 Code.)
Rev. Rul. 81-61, 1981-1 C.B. 355.
220.107 Senior citizens’ center; sale of
appliances. The sale of heavy-duty appliances to
senior citizens by an exempt senior citizens’ center
is unrelated trade or business. §§1.501(c)(3)-1,
1.513-1. (Secs. 501, 513; ’86 Code.)
Rev. Rul. 81-62, 1981-1 C.B. 355.
220.108 Social club, losses from nonprofit
activity. A social club operates a food and beverage
concession catering to nonmembers and has
consistently sold the food and beverages at prices
insufficient to recover the cost of sales. The club
may not, in determining its unrelated business taxable
income, reduce its net investment income by
the losses from these sales to nonmembers.
§§1.501(c)(7)-1, 1.512(a)-1. (Secs. 501, 512; ’86
Code.)
Rev. Rul. 81–69, 1981–1 C.B. 351.
220.109 State college or university; investment
credit. Property used predominantly in an
unrelated trade or business of a college or univer-