Bartels Trust for Benefit of Cornell University ex rel. Bartels v. United States

617 F.3d 1357 (2010)

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Bartels Trust for Benefit of Cornell University ex rel. Bartels v. United States

United States Court of Appeals for the Federal Circuit
617 F.3d 1357 (2010)

Facts

The Bartels Trust for the Benefit of Cornell University (the trust) (plaintiff) was a trust formed to financially support Cornell University. The trust applied for and received tax-exempt status from the Internal Revenue Service (IRS). In tax years 1999 and 2000, the trust purchased stocks on margin, meaning the trust borrowed money from its broker to purchase the stocks. The trust later sold the stocks for a profit. When the trust filed its income tax return for 1999, it reported the income from the sales as capital gains but reported no tax liability. After an IRS audit, the trust paid $48,770 in 1999 due to the stock sales in unrelated-business-income taxes (UBIT) pursuant to the federal tax code. The trust paid $39,479 in UBIT on the stock sales in 2000. The trust subsequently requested a refund of $88,249 from the IRS for the UBIT payments it had made, which the IRS denied. The trust then filed a lawsuit with the United States Court of Federal Claims. The Court of Federal Claims ruled in favor of the government, finding that the trust’s income from the sale of stocks was unrelated business taxable income subject to the UBIT. The trust appealed.

Rule of Law

Issue

Holding and Reasoning (Prost, J.)

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