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Redlands Surgical Services v. Commissioner of Internal Revenue

United States Tax Court
113 T.C. 47 (1999)


Redlands Surgical Services (RSS) (plaintiff) was a nonprofit corporation owned by RHS Corp., a nonprofit public benefit corporation that also owned Redlands Community Hospital, a tax-exempt nonprofit entity. Surgical Care Affiliates, Inc. (SCA) was a for-profit, public corporation that owned two subsidiaries: Redlands-Centers and Redlands Management. RSS partnered with Redlands-Centers to establish a “General Partnership” and the “General Partnership” was also partnered with Inland Surgery Center Limited Partnership to create the “Operating Partnership.” Thereafter, RSS applied to the Internal Revenue Service (defendant) (IRS) for tax-exempt status. The IRS denied RSS’s application stating, “basically, all you have done is invest in a for-profit entity, Inland, and transfer the profits from this investment to your parent.”

Rule of Law


Holding and Reasoning (Thornton, J.)

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