Education Athletic Association v. Commissioner

77 T.C.M. 1525 (1999)

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Education Athletic Association v. Commissioner

United States Tax Court
77 T.C.M. 1525 (1999)

Facts

The Education Athletic Association (the association) (plaintiff) was a § 501(c)(3) organization whose primary exempt purpose was to promote athletic education. The association’s sole source of income for 1993 through 1995 was the sale of pickle cards to liquor establishments in Nebraska. Pickle cards were a game of chance authorized by Nebraska statute. The state licensed manufacturers to sell the cards to licensed distributors who sold them to licensed organizations like the association, which, in turn, sold them to licensed operators. The association reported its income from the sale of pickle cards as unrelated business taxable income (UBTI). The commissioner of internal revenue (commissioner) (defendant) determined that, effective January 1, 1993, the association was not a publicly supported organization as defined in Internal Revenue Code § 509(a)(2) and was therefore a private foundation. The commissioner argued that the association was not a publicly supported organization because it received all its support from pickle-card sales, which was an unrelated trade or business. The association contended that the sale of pickle cards was not an unrelated trade or business because only exempt organizations could be licensed to sell pickle cards, and that therefore, the association did not compete with for-profit entities.

Rule of Law

Issue

Holding and Reasoning (Nims, J.)

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