26 U.S.C. § 502
Feeder organizations
An organization operated for the primary purpose of carrying on a trade or business for profit shall not be exempt from taxation under section 501 on the ground that all of its profits are payable to one or more organizations exempt from taxation under section 501.
1969—Pub. L. 91–172 redesignated first sentence of existing provisions as subsec. (a), and substantial portion of second sentence as subsec. (b)(1), and, in subsec. (b)(1) as so redesignated, inserted reference to section 512 of this title, and added pars. (2) and (3).
Amendment by Pub. L. 91–172 applicable to taxable years beginning after
Notes of Decisions
Cited in 28
cases, 1948–2010 · leading case: HCSC-Laundry v. United States
HCSC-Laundry v. United States (1981)
“[5] See also § 502, as amended, of the 1954 Code, 26 U. S. C. § 502 . This position, however, was rejected by the Court of Claims in Hospital Bureau of Standards and Supplies, Inc.”
Commissioner v. Groetzinger (1987)
“…See § 355(b)(2), 26 U. S. C. § 355 (b)(2) (distribution of stock of controlled corporation); §§ 502(b), and 513(b), 26 U. S. C. §§ 502 (b) and 513(b) (exempt organizations); and § 7701(a)(26), 26 U. S. C. § 7701 (a)(26) (defining the term to include "the performance of the…”
Geisinger Health Plan v. Commissioner of Internal Revenue Service (1994)
“26 U.S.C. § 502 (a). See generally 9 Merten’s Law of Federal Income Taxation § 34.”
United States v. George (2006)
“See 26 U.S.C. § 502 (profits of business not tax-exempt simply because profits ultimately paid to tax-exempt organization).”
Randolph Products Co. v. Manning (1949)
“The single issue presented by this appeal is whether the income of a corporation derived exclusively from the rental of its property to a partnership consisting of husband atid wife who own all of the corporation’s capital stock, is “personal holding -company income” within the…”
In Re Las Vegas Monorail Co. (2010)
“Her article suggestions looking to 26 U.S.C. § 502 (c)(27) and its four-part test to assess whether an enterprise or organization is an instrumentality for tax purposes.”
Northern California Central Services, Inc. v. United States (1979)
“, supra, stated its objection to the Treasury Regulation and example given very clearly: Charitably put (no pun intended), the Court has difficulty in finding any basis in the statute, 26 U.S.C. § 502 , for the underlined portion of the regulation.”
Veterans Foundation, a Non-Profit Corporation v. United States (1960)
“The trial court found that Veterans Foundation was organized for the primary purpose of carrying on a business for profit and, although under contractual arrangements it paid a percentage of its profits to Department of Utah, Disabled American Veterans, it was a feeder…”
Elisian Guild, Inc. v. United States (1969)
“Such “feeder” organizations generally do not qualify for exemption because of 26 U.S.C. § 502 . 6 . “We do not mean to say that a profitable operation must lead to taxation while a nonprofitable one will be exempt.”
De La Salle Institute v. United States (1961)
“A “feeder” corporation, which is engaged in the carrying on of a business or trade for profit, and which pays its profits over to an exempt corporation [even to a church], is also subject to tax (1939 Internal Revenue Code, § 421(b) (1) (A); 1954 Internal Revenue Code, § 502…”
Redler Conveyor Company v. Commissioner of Internal Revenue (1962)
“558 ; Section 502(a) of the Internal Revenue Code of 1939, 26 U.S.C. § 502 (a) quoted in the margin.”
Veterans Foundation v. Commissioner of Internal Revenue (1963)
“The net profits are delivered to the Utah Department of the Disabled American Veterans, a tax-exempt charitable organization.”
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