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FUNDAMENTAL CONCEPTSof the organizations. 145 The court found the following “circular flow” of funds:(1) CO loaned money to BL on a short-term basis at a 2.5 percent interest rate; (2)BL then lent the money to FP for a 20-year term, also at a 2.5 percent rate; (3) FPthen lent the funds at a 3 percent interest rate to investors; and (4) the investorswould complete the flow by contributing the funds to CO. 146 The consequenceof this money circle scheme was that the organizations and the “contributors”improved themselves financially. With each transaction, FP received a promiseof small interest payments and a repayment of principal in 20 years. CO, whilebreaking even on the funds “contributed” (since it was the source of the funds),received a small contribution from an investor’s personal funds with each transaction.Each investor received a large tax benefit from the charitable deduction,a benefit that more than offset the present value of the interest and principal heor she agreed to pay to FP. Said the court: “The loser in the whole enterprise wasthe federal government, which in effect financed the gains received by the [threerelated] organizations and the private investors.” 147One of the many of these “donors” (the subject of the case) was B. He borrowed$22,500 from FP; within 20 minutes of the borrowing, he added $2,500 ofhis own funds and made a $25,000 “gift” to CO. The IRS disallowed $22,500 ofthe claimed charitable deduction and the matter went to court, where the governmentprevailed. The denial of the deduction was based on the lack of economicsubstance underlying the transaction. The court concluded that the threeorganizations “operated essentially as an integrated whole” with respect to theloan program. 148 It viewed the three organizations as a “single unit” that was notenriched by the $22,500 “contribution.” 149 The court observed that the passage ofthe $22,500 through the three organizations left each of them in essentially thesame position as if no contribution had been made. Aside from the $2,500 “true”contribution, the court found that the only real economic change at the close ofthe transaction was B’s obligation to pay funds over the next 20 years to FP, aresult no different than if B had signed a note to pay CO $22,500 over 20 years.The court observed that this type of promise to make a contribution in the futuredoes not qualify for a current charitable contribution. 150(e) Donor RecognitionOne of the most recent applications of this aspect of the law arose out of theidentification of college athletic events using the name of the corporate sponsor(such as the conversion of the Cotton Bowl to the Mobil Cotton Bowl). In 1991,the IRS ruled that the payments received by the tax-exempt organization thatsponsors the Cotton Bowl were not gifts but were payments for services rendered,in the nature of advertising. 151145 Id. at 87,325.146 Id.147 Id.148 Allen v. Commissioner, , 91-1 U.S.T.C. at 87, 326.149 Id.150 See the discussion of gifts of notes at § 6.7.151 Tech. Adv. Mem. 9147007. 78