University Medical Resident Services, P.C. v. Commissioner

T.C. Memo. 1996-251, 71 TCM 3130 (1996)

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University Medical Resident Services, P.C. v. Commissioner

United States Tax Court
T.C. Memo. 1996-251, 71 TCM 3130 (1996)

Facts

A large network of multiple legal entities collaborated to administer the residency programs for the medical and dental schools (schools) of the State University of New York at Buffalo. Much of the decision-making authority and administration of this network was centralized and vested in a sole organization referred to as the Consortium. University Medical Resident Services, P.C. (UMRS) and University Dental Resident Services, P.C. (UDRS) (plaintiffs) were incorporated to help administer the residency programs. Various agreements purported to vest in UMRS and UDRS certain powers, such as the power to hire and fire residents. However, given the structure of the agreements, all meaningful power was, in practice, held by the Consortium or the schools. UMRS and UDRS’s primary function was to perform payroll-administration tasks for the residency programs. UMRS and UDRS had no employees, so their duties were generally carried out by school employees. UMRS and UDRS applied for tax-exempt status, arguing that they qualified as integral parts of the operations of the Consortium, which was a tax-exempt organization under § 501(c)(3) of the Internal Revenue Code. The Internal Revenue Service (IRS) (defendant) denied UMRS and UDRS’s tax-exempt status. UMRS and UDRS petitioned the United States Tax Court to review the IRS’s determination.

Rule of Law

Issue

Holding and Reasoning (Foley, J.)

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