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Free File 2011 Taxes

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Free File 2011 Taxes

Free file 2011 taxes 3. Free file 2011 taxes   Unrelated Trade or Business Table of Contents Selling of products of exempt functions. Free file 2011 taxes Dual use of assets or facilities. Free file 2011 taxes Exploitation of exempt functions. Free file 2011 taxes ExamplesExceptions. Free file 2011 taxes Excluded Trade or Business ActivitiesQualified sponsorship payment. Free file 2011 taxes Advertising. Free file 2011 taxes Exception for contingent payments. Free file 2011 taxes Exception for periodicals. Free file 2011 taxes Exception for conventions and trade shows. Free file 2011 taxes Legal definition. Free file 2011 taxes Legal where played. Free file 2011 taxes No for-profit games where played. Free file 2011 taxes Unrelated business income. Free file 2011 taxes   Unrelated business income is the income from a trade or business regularly conducted by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that the organization uses the profits derived from this activity. Free file 2011 taxes   Certain trade or business activities are not treated as an unrelated trade or business. Free file 2011 taxes See Excluded Trade or Business Activities, later. Free file 2011 taxes Trade or business. Free file 2011 taxes   The term “trade or business” generally includes any activity conducted for the production of income from selling goods or performing services. Free file 2011 taxes An activity does not lose its identity as a trade or business merely because it is conducted within a larger group of similar activities that may or may not be related to the exempt purposes of the organization. Free file 2011 taxes   For example, the regular sale of pharmaceutical supplies to the general public by a hospital pharmacy does not lose its identity as a trade or business, even though the pharmacy also furnishes supplies to the hospital and patients of the hospital in accordance with its exempt purpose. Free file 2011 taxes Similarly, soliciting, selling, and publishing commercial advertising is a trade or business even though the advertising is published in an exempt organization's periodical that contains editorial matter related to the organization's exempt purpose. Free file 2011 taxes Regularly conducted. Free file 2011 taxes   Business activities of an exempt organization ordinarily are considered regularly conducted if they show a frequency and continuity, and are pursued in a manner similar to comparable commercial activities of nonexempt organizations. Free file 2011 taxes   For example, a hospital auxiliary's operation of a sandwich stand for 2 weeks at a state fair would not be the regular conduct of a trade or business. Free file 2011 taxes The stand would not compete with similar facilities that a nonexempt organization would ordinarily operate year-round. Free file 2011 taxes However, operating a commercial parking lot every Saturday, year-round, would be the regular conduct of a trade or business. Free file 2011 taxes Not substantially related. Free file 2011 taxes    A business activity is not substantially related to an organization's exempt purpose if it does not contribute importantly to accomplishing that purpose (other than through the production of funds). Free file 2011 taxes Whether an activity contributes importantly depends in each case on the facts involved. Free file 2011 taxes   In determining whether activities contribute importantly to the accomplishment of an exempt purpose, the size and extent of the activities involved must be considered in relation to the nature and extent of the exempt function that they intend to serve. Free file 2011 taxes For example, to the extent an activity is conducted on a scale larger than is reasonably necessary to perform an exempt purpose, it does not contribute importantly to the accomplishment of the exempt purpose. Free file 2011 taxes The part of the activity that is more than needed to accomplish the exempt purpose is an unrelated trade or business. Free file 2011 taxes   Also in determining whether activities contribute importantly to the accomplishment of an exempt purpose, the following principles apply. Free file 2011 taxes Selling of products of exempt functions. Free file 2011 taxes   Ordinarily, selling products that result from the performance of exempt functions is not an unrelated trade or business if the product is sold in substantially the same state it is in when the exempt functions are completed. Free file 2011 taxes Thus, for an exempt organization engaged in rehabilitating handicapped persons (its exempt function), selling articles made by these persons as part of their rehabilitation training is not an unrelated trade or business. Free file 2011 taxes   However, if a completed product resulting from an exempt function is used or exploited in further business activity beyond what is reasonably appropriate or necessary to dispose of it as is, the activity is an unrelated trade or business. Free file 2011 taxes For example, if an exempt organization maintains an experimental dairy herd for scientific purposes, the sale of milk and cream produced in the ordinary course of operation of the project is not an unrelated trade or business. Free file 2011 taxes But if the organization uses the milk and cream in the further manufacture of food items such as ice cream, pastries, etc. Free file 2011 taxes , the sale of these products is an unrelated trade or business unless the manufacturing activities themselves contribute importantly to the accomplishment of an exempt purpose of the organization. Free file 2011 taxes Dual use of assets or facilities. Free file 2011 taxes   If an asset or facility necessary to the conduct of exempt functions is also used in commercial activities, its use for exempt functions does not, by itself, make the commercial activities a related trade or business. Free file 2011 taxes The test, as discussed earlier, is whether the activities contribute importantly to the accomplishment of exempt purposes. Free file 2011 taxes   For example, a museum has a theater auditorium designed for showing educational films in connection with its program of public education in the arts and sciences. Free file 2011 taxes The theater is a principal feature of the museum and operates continuously while the museum is open to the public. Free file 2011 taxes If the organization also operates the theater as a motion picture theater for the public when the museum is closed, the activity is an unrelated trade or business. Free file 2011 taxes   For information on allocating expenses for the dual use of assets or facilities, see Deductions in chapter 4. Free file 2011 taxes Exploitation of exempt functions. Free file 2011 taxes   Exempt activities sometimes create goodwill or other intangibles that can be exploited in a commercial way. Free file 2011 taxes When an organization exploits such an intangible in commercial activities, the fact that the income depends in part upon an exempt function of the organization does not make the commercial activities a related trade or business. Free file 2011 taxes Unless the commercial exploitation contributes importantly to the accomplishment of the exempt purpose, the commercial activities are an unrelated trade or business. Free file 2011 taxes   For the treatment of expenses attributable to the exploitation of exempt activities, see Deductions in chapter 4. Free file 2011 taxes Examples The following are examples of activities that were determined to be (or not to be) unrelated trades or businesses using the definitions and principles just discussed. Free file 2011 taxes Sales commissions. Free file 2011 taxes   An agricultural organization, whose exempt purposes are to promote better conditions for cattle breeders and to improve the breed generally, engages in an unrelated trade or business when it regularly sells cattle for its members on a commission basis. Free file 2011 taxes Artists' facilities. Free file 2011 taxes   An organization whose exempt purpose is to stimulate and foster public interest in the fine arts by promoting art exhibits, sponsoring cultural events, and furnishing information about fine arts leases studio apartments to artist tenants and operates a dining hall primarily for these tenants. Free file 2011 taxes These two activities do not contribute importantly to accomplishing the organization's exempt purpose. Free file 2011 taxes Therefore, they are unrelated trades or businesses. Free file 2011 taxes Membership list sales. Free file 2011 taxes   An exempt educational organization regularly sells membership mailing lists to business firms. Free file 2011 taxes This activity does not contribute importantly to the accomplishment of the organization's exempt purpose and therefore is an unrelated trade or business. Free file 2011 taxes Also see Exchange or rental of member lists under Excluded Trade or Business Activities, later. Free file 2011 taxes Hospital facilities. Free file 2011 taxes   An exempt hospital leases its adjacent office building and furnishes certain office services to a hospital-based medical group for a fee. Free file 2011 taxes The group provides all diagnostic and therapeutic procedures to the hospital's patients and operates the hospital's emergency room on a 24-hour basis. Free file 2011 taxes The leasing activity is substantially related to the hospital's exempt purpose and is not an unrelated trade or business. Free file 2011 taxes   The hospital also operates a gift shop patronized by patients, visitors making purchases for patients, and employees; a cafeteria and coffee shop primarily for employees and medical staff; and a parking lot for patients and visitors only. Free file 2011 taxes These activities are also substantially related to the hospital's exempt purpose and do not constitute unrelated trades or businesses. Free file 2011 taxes Book publishing. Free file 2011 taxes   An exempt organization engages primarily in activities that further its exempt purposes. Free file 2011 taxes It also owns the publication rights to a book that does not relate to any of its exempt purposes. Free file 2011 taxes The organization exploits the book in a commercial manner by arranging for printing, distribution, publicity, and advertising in connection with the sale of the book. Free file 2011 taxes These activities constitute a trade or business regularly conducted. Free file 2011 taxes Because exploiting the book is unrelated to the organization's exempt purposes (except for the use of the book's profits), the income is unrelated business income. Free file 2011 taxes   However, if the organization transfers publication rights to a commercial publisher in return for royalties, the royalty income received will not be unrelated business income. Free file 2011 taxes See Royalties under Exclusions in chapter 4. Free file 2011 taxes School handicraft shop. Free file 2011 taxes   An exempt vocational school operates a handicraft shop that sells articles made by students in their regular courses of instruction. Free file 2011 taxes The students are paid a percentage of the sales price. Free file 2011 taxes In addition, the shop sells products made by local residents who make articles at home according to the shop's specifications. Free file 2011 taxes The shop manager periodically inspects the articles during their manufacture to ensure that they meet desired standards of style and quality. Free file 2011 taxes Although many local participants are former students of the school, any qualified person may participate in the program. Free file 2011 taxes The sale of articles made by students does not constitute an unrelated trade or business, but the sale of products made by local residents is an unrelated trade or business and is subject to unrelated business income tax. Free file 2011 taxes School facilities. Free file 2011 taxes   An exempt school has tennis courts and dressing rooms that it uses during the regular school year in its educational program. Free file 2011 taxes During the summer, the school operates a tennis club open to the general public. Free file 2011 taxes Employees of the school run the club, including collecting membership fees and scheduling court time. Free file 2011 taxes   Another exempt school leases the same type of facilities to an unrelated individual who runs a tennis club for the summer. Free file 2011 taxes The lease is for a fixed fee that does not depend on the income or profits derived from the leased property. Free file 2011 taxes   In both situations, the exempt purpose is the advancement of education. Free file 2011 taxes Furnishing tennis facilities in the manner described does not further that exempt purpose. Free file 2011 taxes These activities are unrelated trades or businesses. Free file 2011 taxes However, in the second situation the income derived from the leasing of the property is excluded from unrelated business taxable income as rent from real property. Free file 2011 taxes See Rents under Exclusions in chapter 4. Free file 2011 taxes Services provided with lease. Free file 2011 taxes   An exempt university leases its football stadium during several months of the year to a professional football team for a fixed fee. Free file 2011 taxes Under the lease agreement, the university furnishes heat, light, and water and is responsible for all ground maintenance. Free file 2011 taxes It also provides dressing room, linen, and stadium security services for the professional team. Free file 2011 taxes   Leasing of the stadium is an unrelated trade or business. Free file 2011 taxes In addition, the substantial services furnished for the convenience of the lessee go beyond those usually provided with the rental of space for occupancy only. Free file 2011 taxes Therefore, the income from this lease is rent from real property and unrelated business taxable income. Free file 2011 taxes Broadcasting rights. Free file 2011 taxes   An exempt collegiate athletic conference conducts an annual competitive athletic game between its conference champion and another collegiate team. Free file 2011 taxes Income is derived from admission charges and the sale of exclusive broadcasting rights to a national radio and television network. Free file 2011 taxes An athletic program is considered an integral part of the educational process of a university. Free file 2011 taxes   The educational purposes served by intercollegiate athletics are identical whether conducted directly by individual universities or by their regional athletic conference. Free file 2011 taxes Also, the educational purposes served by exhibiting a game before an audience that is physically present and exhibiting the game on television or radio before a much larger audience are substantially similar. Free file 2011 taxes Therefore, the sale of the broadcasting rights contributes importantly to the accomplishment of the organization's exempt purpose and is not an unrelated trade or business. Free file 2011 taxes   In a similar situation, an exempt organization was created as a national governing body for amateur athletes to foster interest in amateur sports and to encourage widespread public participation. Free file 2011 taxes The organization receives income each year from the sale of exclusive broadcasting rights to an independent producer, who contracts with a commercial network to broadcast many of the athletic events sponsored, supervised, and regulated by the organization. Free file 2011 taxes   The broadcasting of these events promotes the various amateur sports, fosters widespread public interest in the benefits of the organization's nationwide amateur program, and encourages public participation. Free file 2011 taxes The sale of the rights and the broadcasting of the events contribute importantly to the organization's exempt purpose. Free file 2011 taxes Therefore, the sale of the exclusive broadcasting rights is not an unrelated trade or business. Free file 2011 taxes Yearbook advertising. Free file 2011 taxes   An exempt organization receives income from the sale of advertising in its annual yearbook. Free file 2011 taxes The organization hires an independent commercial firm, under a contract covering a full calendar year, to conduct an intensive advertising solicitation campaign in the organization's name. Free file 2011 taxes This firm is paid a percentage of the gross advertising receipts for selling the advertising, collecting from advertisers, and printing the yearbook. Free file 2011 taxes This advertising activity is an unrelated trade or business. Free file 2011 taxes Pet boarding and grooming services. Free file 2011 taxes   An exempt organization, organized and operated for the prevention of cruelty to animals, receives unrelated business income from providing pet boarding and grooming services for the general public. Free file 2011 taxes These activities do not contribute importantly to its purpose of preventing cruelty to animals. Free file 2011 taxes Museum eating facilities. Free file 2011 taxes   An exempt art museum operates a dining room, a cafeteria, and a snack bar for use by the museum staff, employees, and visitors. Free file 2011 taxes Eating facilities in the museum help to attract visitors and allow them to spend more time viewing the museum's exhibits without having to seek outside restaurants at mealtime. Free file 2011 taxes The eating facilities also allow the museum staff and employees to remain in the museum throughout the day. Free file 2011 taxes Thus, the museum's operation of the eating facilities contributes importantly to the accomplishment of its exempt purposes and is not unrelated trade or business. Free file 2011 taxes Halfway house workshop. Free file 2011 taxes   A halfway house organized to provide room, board, therapy, and counseling for persons discharged from alcoholic treatment centers also operates a furniture shop to provide full-time employment for its residents. Free file 2011 taxes The profits are applied to the operating costs of the halfway house. Free file 2011 taxes The income from this venture is not unrelated trade or business income because the furniture shop contributes importantly to the organization's purpose of aiding its residents' transition from treatment to a normal and productive life. Free file 2011 taxes Travel tour programs. Free file 2011 taxes   Travel tour activities that are a trade or business are an unrelated trade or business if the activities are not substantially related to the purpose for which tax exemption was granted to the organization. Free file 2011 taxes Example 1. Free file 2011 taxes A tax-exempt university alumni association provides a travel tour program for its members and their families. Free file 2011 taxes The organization works with various travel agencies and schedules approximately ten tours a year to various places around the world. Free file 2011 taxes It mails out promotional material and accepts reservations for fees paid by the travel agencies on a per-person basis. Free file 2011 taxes The organization provides an employee for each tour as a tour leader. Free file 2011 taxes There is no formal educational program conducted with these tours, and they do not differ from regular commercially operated tours. Free file 2011 taxes By providing travel tours to its members, the organization is engaging in a regularly conducted trade or business. Free file 2011 taxes Even if the tours it offers support the university, financially and otherwise, and encourage alumni to do the same, they do not contribute importantly to the organization's exempt purpose of promoting education. Free file 2011 taxes Therefore, the sale of the travel tours is an unrelated trade or business. Free file 2011 taxes Example 2. Free file 2011 taxes A tax-exempt organization formed for the purpose of educating individuals about the geography and the culture of the United States provides study tours to national parks and other locations within the United States. Free file 2011 taxes These tours are conducted by teachers and others certified by the state board of education. Free file 2011 taxes The tours are primarily designed for students enrolled in degree programs at state educational institutions but are open to all who agree to participate in the required study program associated with the tour taken. Free file 2011 taxes A tour's study program consists of instruction on subjects related to the location being visited on the tour. Free file 2011 taxes Each tour group brings along a library of material related to the subjects being studied on the tour. Free file 2011 taxes During the tour, 5 or 6 hours per day are devoted to organized study, preparation of reports, lectures, instruction, and recitation by the students. Free file 2011 taxes Examinations are given at the end of each tour. Free file 2011 taxes The state board of education awards academic credit for tour participation. Free file 2011 taxes Because these tours are substantially related to the organization's exempt purpose, they are not an unrelated trade or business. Free file 2011 taxes Insurance programs. Free file 2011 taxes   An organization that acts as a group insurance policyholder for its members and collects a fee for performing administrative services is normally carrying on an unrelated trade or business. Free file 2011 taxes Exceptions. Free file 2011 taxes   Organizations whose exempt activities may include the provision of insurance benefits, such as fraternal beneficiary societies, voluntary employees beneficiary associations, and labor organizations, are generally exceptions to this rule. Free file 2011 taxes Magazine publishing. Free file 2011 taxes   An association of credit unions with tax-exempt status as a business league publishes a consumer-oriented magazine four times a year and makes it available to member credit unions for purchase. Free file 2011 taxes   By selling a magazine to its members as a promotional device, the organization furnishes its members with a regular commercial service they can use in their own operations. Free file 2011 taxes This service does not promote the improvement of business conditions of one or more lines of business, which is the exempt purpose of a business league. Free file 2011 taxes   Since the activity does not contribute importantly to the organization's exempt function, it is an unrelated trade or business. Free file 2011 taxes Directory of members. Free file 2011 taxes   A business league publishes an annual directory that contains a list of all its members, their addresses, and their area of expertise. Free file 2011 taxes Each member has the same amount of space in the directory, and its format does not emphasize the relative importance or reputation of any member. Free file 2011 taxes The directory contains no commercial advertisement and is sold only to the organization's members. Free file 2011 taxes   The directory facilitates communication among the members and encourages the exchange of ideas and expertise. Free file 2011 taxes Because the directory lists the members in a similar noncommercial format without advertising and is not distributed to the public, its sale does not confer private commercial benefits on the members. Free file 2011 taxes The sale of the directory does contribute importantly to the organization's exempt purpose and is not an unrelated trade or business. Free file 2011 taxes This directory differs from the publication discussed next because of its noncommercial characteristics. Free file 2011 taxes Sales of advertising space. Free file 2011 taxes   A national association of law enforcement officials publishes a monthly journal that contains articles and other editorial material of professional interest to its members. Free file 2011 taxes The journal is distributed without charge, mainly to the organization's members. Free file 2011 taxes   The organization sells advertising space in the journal either for conventional advertising or to merely identify the purchaser without a commercial message. Free file 2011 taxes Some of the noncommercial advertising identifies the purchaser in a separate space, and some consists of listings of 60 or more purchasers per page. Free file 2011 taxes A business firm identified in a separate space is further identified in an Index of Advertisers. Free file 2011 taxes   The organization solicits advertising by personal contacts. Free file 2011 taxes Advertising from large firms is solicited by contacting their chief executive officer or community relations officer rather than their advertising manager. Free file 2011 taxes The organization also solicits advertising in form letters appealing for corporate and personal contributions. Free file 2011 taxes   An exempt organization's sale of advertising placed for the purchaser's commercial benefit is a commercial activity. Free file 2011 taxes Goodwill derived by the purchaser from being identified as a patron of the organization is usually considered a form of commercial benefit. Free file 2011 taxes Therefore, advertising in an exempt organization's publication is generally presumed to be placed for the purchaser's commercial benefit, even if it has no commercial message. Free file 2011 taxes However, this presumption is not conclusive if the purchaser's patronage would be difficult to justify commercially in view of the facts and circumstances. Free file 2011 taxes In that case, other factors should also be considered in determining whether a commercial benefit can be expected. Free file 2011 taxes Those other factors include: The normal manner in which the publication is circulated; The territorial scope of the circulation; The extent to which its readers, promoters, or the like could reasonably be expected to further, either directly or indirectly, the commercial interest of the advertisers; The eligibility of the publishing organization to receive tax-deductible contributions; and The commercial or noncommercial methods used to solicit the advertisers. Free file 2011 taxes   In this situation, the purchaser of a separate advertising space without a commercial message can nevertheless expect a commercial benefit from the goodwill derived from being identified in that manner as a patron of the organization. Free file 2011 taxes However, the purchaser of a listing cannot expect more than an inconsequential benefit. Free file 2011 taxes Therefore, the sale of separate spaces, but not the listings, is an unrelated trade or business. Free file 2011 taxes Publishing legal notices. Free file 2011 taxes   A bar association publishes a legal journal containing opinions of the county court, articles of professional interest to lawyers, advertisements for products and services used by the legal profession, and legal notices. Free file 2011 taxes The legal notices are published to satisfy state laws requiring publication of notices in connection with legal proceedings, such as the administration of estates and actions to quiet title to real property. Free file 2011 taxes The state designated the bar association's journal as the place to publish the required notices. Free file 2011 taxes   The publication of ordinary commercial advertising does not advance the exempt purposes of the association even when published in a periodical that contains material related to exempt purposes. Free file 2011 taxes Although the advertising is directed specifically to members of the legal profession, it is still commercial in nature and does not contribute importantly to the exempt purposes of the association. Free file 2011 taxes Therefore, the advertising income is unrelated trade or business income. Free file 2011 taxes   On the other hand, the publication of legal notices is distinguishable from ordinary commercial advertising in that its purpose is to inform the general public of significant legal events rather than to stimulate demand for the products or services of an advertiser. Free file 2011 taxes This promotes the common interests of the legal profession and contributes importantly to the association's exempt purposes. Free file 2011 taxes Therefore, the publishing of legal notices does not constitute an unrelated trade or business. Free file 2011 taxes Museum greeting card sales. Free file 2011 taxes    An art museum that exhibits modern art sells greeting cards that display printed reproductions of selected works from other art collections. Free file 2011 taxes Each card is imprinted with the name of the artist, the title or subject matter of the work, the date or period of its creation, if known, and the museum's name. Free file 2011 taxes The cards contain appropriate greetings and are personalized on request. Free file 2011 taxes   The organization sells the cards in the shop it operates in the museum and sells them at quantity discounts to retail stores. Free file 2011 taxes It also sells them by mail order through a catalog that is advertised in magazines and other publications throughout the year. Free file 2011 taxes As a result, a large number of cards are sold at a significant profit. Free file 2011 taxes   The museum is exempt as an educational organization on the basis of its ownership, maintenance, and exhibition for public viewing of works of art. Free file 2011 taxes The sale of greeting cards with printed reproductions of artworks contributes importantly to the achievement of the museum's exempt educational purposes by enhancing public awareness, interest, and appreciation of art. Free file 2011 taxes The cards may encourage more people to visit the museum itself to share in its educational programs. Free file 2011 taxes The fact that the cards are promoted and sold in a commercial manner at a profit and in competition with commercial greeting card publishers does not alter the fact that the activity is related to the museum's exempt purpose. Free file 2011 taxes Therefore, these sales activities are not an unrelated trade or business. Free file 2011 taxes Museum shop. Free file 2011 taxes   An art museum maintained and operated for the exhibition of American folk art operates a shop in the museum that sells: Reproductions of works in the museum's own collection and reproductions of artistic works from the collections of other art museums (prints suitable for framing, postcards, greeting cards, and slides); Metal, wood, and ceramic copies of American folk art objects from its own collection and similar copies of art objects from other collections of artworks; Instructional literature and scientific books and souvenir items concerning the history and development of art and, in particular, of American folk art; and Scientific books and souvenir items of the city in which the museum is located. Free file 2011 taxes   The shop also rents originals or reproductions of paintings contained in its collection. Free file 2011 taxes All of its reproductions are imprinted with the name of the artist, the title or subject matter of the work from which it is reproduced, and the museum's name. Free file 2011 taxes   Each line of merchandise must be considered separately to determine if sales are related to the exempt purpose. Free file 2011 taxes   The sale and rental of reproductions and copies of works from the museum's own collection and reproductions of artistic works not owned by the museum contribute importantly to the achievement of the museum's exempt educational purpose by making works of art familiar to a broader segment of the public, thereby enhancing the public's understanding and appreciation of art. Free file 2011 taxes The same is true for the sale of literature relating to art. Free file 2011 taxes Therefore, these sales activities are not an unrelated trade or business. Free file 2011 taxes   On the other hand, the sale of scientific books and souvenir items of the city where the museum is located has no causal relationship to art or to artistic endeavor and, therefore, does not contribute importantly to the accomplishment of the museum's exempt educational purposes. Free file 2011 taxes The fact that selling some of these items could, under different circumstances, be held related to the exempt educational purpose of some other exempt educational organization does not change this conclusion. Free file 2011 taxes Additionally, the sale of these items does not lose its identity as a trade or business merely because the museum also sells articles which do contribute importantly to the accomplishment of its exempt function. Free file 2011 taxes Therefore, these sales are an unrelated trade or business. Free file 2011 taxes Business league's parking and bus services. Free file 2011 taxes   A business league, whose purpose is to retain and stimulate trade in a downtown area that has inadequate parking facilities, operates a fringe parking lot and shuttle bus service. Free file 2011 taxes It also operates, as an insubstantial part of its activities, a park and shop plan. Free file 2011 taxes   The fringe parking lot and shuttle bus service operate in a manner that does not favor any individual or group of downtown merchants. Free file 2011 taxes The merchants cannot offer free or discount parking or bus fares to their customers. Free file 2011 taxes   The park and shop plan allows customers of particular merchants to park free at certain parking lots in the area. Free file 2011 taxes Merchants participating in this plan buy parking stamps, which they distribute to their customers to use to pay for parking. Free file 2011 taxes   Operating the fringe parking lot and shuttle bus service provides easy and convenient access to the downtown area and, therefore, stimulates and improves business conditions in the downtown area generally. Free file 2011 taxes That activity contributes importantly to the organization's accomplishing its exempt purpose and is not an unrelated trade or business. Free file 2011 taxes   The park and shop plan encourages customers to use a limited number of participating member merchants in order to obtain free parking. Free file 2011 taxes This provides a particular service to individual members of the organization and does not further its exempt purpose. Free file 2011 taxes Therefore, operating the park and shop plan is an unrelated trade or business. Free file 2011 taxes Youth residence. Free file 2011 taxes   An exempt organization, whose purpose is to provide for the welfare of young people, rents rooms primarily to people under age 25. Free file 2011 taxes The residence units are operated on, and as a part of, the premises in which the organization carries on the social, recreational, and guidance programs for which it was recognized as exempt. Free file 2011 taxes The facilities are under the management and supervision of trained career professionals who provide residents with personal counseling, physical education programs, and group recreational activities. Free file 2011 taxes The rentals are not an unrelated trade or business because renting the rooms is substantially related to the organization's exempt purpose. Free file 2011 taxes Health club program. Free file 2011 taxes   An exempt charitable organization's purpose is to provide for the welfare of young people. Free file 2011 taxes The organization conducts charitable activities and maintains facilities that will contribute to the physical, social, mental, and spiritual health of young people at minimum or no cost to them. Free file 2011 taxes Nominal annual dues are charged for membership in the organization and use of the facilities. Free file 2011 taxes   In addition, the organization organized a health club program that its members could join for an annual fee in addition to the annual dues. Free file 2011 taxes The annual fee is comparable to fees charged by similar local commercial health clubs and is sufficiently high to restrict participation in the program to a limited number of members of the community. Free file 2011 taxes   The health club program is in addition to the general physical fitness program of the organization. Free file 2011 taxes Operating this program does not contribute importantly to the organization's accomplishing its exempt purpose and, therefore, is an unrelated trade or business. Free file 2011 taxes Miniature golf course. Free file 2011 taxes   An exempt youth welfare organization operates a miniature golf course that is open to the general public. Free file 2011 taxes The course, which is managed by salaried employees, is substantially similar to commercial courses. Free file 2011 taxes The admission fees charged are comparable to fees of commercial facilities and are designed to return a profit. Free file 2011 taxes   The operation of the miniature golf course in a commercial manner does not contribute importantly to the accomplishment of the organization's exempt purpose and, therefore, is an unrelated trade or business. Free file 2011 taxes Sales of hearing aids. Free file 2011 taxes   A tax-exempt hospital, whose primary activity is rehabilitation, sells hearing aids to patients. Free file 2011 taxes This activity is an essential part of the hospital's program to test and evaluate patients with hearing deficiencies and contributes importantly to its exempt purpose. Free file 2011 taxes It is not an unrelated trade or business. Free file 2011 taxes Nonpatient laboratory testing. Free file 2011 taxes   Nonpatient laboratory testing performed by a tax-exempt teaching hospital on specimens needed for the conduct of its teaching activities is not an unrelated trade or business. Free file 2011 taxes However, laboratory testing performed by a tax-exempt non-teaching hospital on referred specimens from private office patients of staff physicians is an unrelated trade or business if these services are otherwise available in the community. Free file 2011 taxes Selling endorsements. Free file 2011 taxes   An exempt scientific organization enjoys an excellent reputation in the field of biological research. Free file 2011 taxes It exploits this reputation regularly by selling endorsements of laboratory equipment to manufacturers. Free file 2011 taxes Endorsing laboratory equipment does not contribute importantly to the accomplishment of any purpose for which exemption is granted to the organization. Free file 2011 taxes Accordingly, the sale of endorsements is an unrelated trade or business. Free file 2011 taxes Sponsoring entertainment events. Free file 2011 taxes   An exempt university has a regular faculty and a regularly enrolled student body. Free file 2011 taxes During the school year, the university sponsors the appearance of professional theater companies and symphony orchestras that present drama and musical performances for the students and faculty members. Free file 2011 taxes Members of the general public also are admitted. Free file 2011 taxes The university advertises these performances and supervises advance ticket sales at various places, including such university facilities as the cafeteria and the university bookstore. Free file 2011 taxes Although the presentation of the performances makes use of an intangible generated by the university's exempt educational functions—the presence of the student body and faculty—such drama and music events contribute importantly to the overall educational and cultural functions of the university. Free file 2011 taxes Therefore, the activity is not an unrelated trade or business. Free file 2011 taxes Excluded Trade or Business Activities The following activities are specifically excluded from the definition of unrelated trade or business. Free file 2011 taxes Volunteer workforce. Free file 2011 taxes   Any trade or business in which substantially all the work is performed for the organization without compensation is not an unrelated trade or business. Free file 2011 taxes Example 1. Free file 2011 taxes A retail store operated by an exempt orphanage where unpaid volunteers perform substantially all the work in carrying on the business is not an unrelated trade or business. Free file 2011 taxes Example 2. Free file 2011 taxes A volunteer fire company conducts weekly public dances. Free file 2011 taxes Holding public dances and charging admission on a regular basis may, given the facts and circumstances of a particular case, be considered an unrelated trade or business. Free file 2011 taxes However, because the work at the dances is performed by unpaid volunteers, the activity is not an unrelated trade or business. Free file 2011 taxes Convenience of members. Free file 2011 taxes   A trade or business conducted by a 501(c)(3) organization or by a governmental college or university primarily for the convenience of its members, students, patients, officers, or employees is not an unrelated trade or business. Free file 2011 taxes For example, a laundry operated by a college for the purpose of laundering dormitory linens and students' clothing is not an unrelated trade or business. Free file 2011 taxes Qualified sponsorship activities. Free file 2011 taxes   Soliciting and receiving qualified sponsorship payments is not an unrelated trade or business, and the payments are not subject to unrelated business income tax. Free file 2011 taxes Qualified sponsorship payment. Free file 2011 taxes   This is any payment made by a person engaged in a trade or business for which the person will receive no substantial benefit other than the use or acknowledgment of the business name, logo, or product lines in connection with the organization's activities. Free file 2011 taxes “Use or acknowledgment” does not include advertising the sponsor's products or services. Free file 2011 taxes The organization's activities include all its activities, whether or not related to its exempt purposes. Free file 2011 taxes   For example, if, in return for receiving a sponsorship payment, an organization promises to use the sponsor's name or logo in acknowledging the sponsor's support for an educational or fundraising event, the payment is a qualified sponsorship payment and is not subject to the unrelated business income tax. Free file 2011 taxes   Providing facilities, services, or other privileges (for example, complimentary tickets, pro-am playing spots in golf tournaments, or receptions for major donors) to a sponsor or the sponsor's designees in connection with a sponsorship payment does not affect whether the payment is a qualified sponsorship payment. Free file 2011 taxes Instead, providing these goods or services is treated as a separate transaction in determining whether the organization has unrelated business income from the event. Free file 2011 taxes Generally, if the services or facilities are not a substantial benefit or if providing them is a related business activity, the payments will not be subject to the unrelated business income tax. Free file 2011 taxes   Similarly, the sponsor's receipt of a license to use an intangible asset (for example, a trademark, logo, or designation) of the organization is treated as separate from the qualified sponsorship transaction in determining whether the organization has unrelated business taxable income. Free file 2011 taxes   If part of a payment would be a qualified sponsorship payment if paid separately, that part is treated as a separate payment. Free file 2011 taxes For example, if a sponsorship payment entitles the sponsor to both product advertising and the use or acknowledgment of the sponsor's name or logo by the organization, then the unrelated business income tax does not apply to the part of the payment that is more than the fair market value of the product advertising. Free file 2011 taxes Advertising. Free file 2011 taxes   A payment is not a qualified sponsorship payment if, in return, the organization advertises the sponsor's products or services. Free file 2011 taxes For information on the treatment of payments for advertising, see Exploitation of Exempt Activity—Advertising Sales in chapter 4. Free file 2011 taxes   Advertising includes: Messages containing qualitative or comparative language, price information, or other indications of savings or value; Endorsements; and Inducements to purchase, sell, or use the products or services. Free file 2011 taxes   The use of promotional logos or slogans that are an established part of the sponsor's identity is not, by itself, advertising. Free file 2011 taxes In addition, mere distribution or display of a sponsor's product by the organization to the public at a sponsored event, whether for free or for remuneration, is considered use or acknowledgment of the product rather than advertising. Free file 2011 taxes Exception for contingent payments. Free file 2011 taxes   A payment is not a qualified sponsorship payment if its amount is contingent, by contract or otherwise, upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events. Free file 2011 taxes However, the fact that a sponsorship payment is contingent upon an event actually taking place or being broadcast does not, by itself, affect whether a payment qualifies. Free file 2011 taxes Exception for periodicals. Free file 2011 taxes   A payment is not a qualified sponsorship payment if it entitles the payer to the use or acknowledgment of the business name, logo, or product lines in the organization's periodical. Free file 2011 taxes For this purpose, a periodical is any regularly scheduled and printed material (for example, a monthly journal) published by or on behalf of the organization. Free file 2011 taxes It does not include material that is related to and primarily distributed in connection with a specific event conducted by the organization (for example, a program or brochure distributed at a sponsored event). Free file 2011 taxes   The treatment of payments that entitle the payer to the depiction of the payer's name, logo, or products lines in an organization's periodical is determined under the rules that apply to advertising activities. Free file 2011 taxes See Sales of advertising space under Examples, earlier in this chapter. Free file 2011 taxes Also see Exploitation of Exempt Activity—Advertising Sales in chapter 4. Free file 2011 taxes Exception for conventions and trade shows. Free file 2011 taxes   A payment is not a qualified sponsorship payment if it is made in connection with any qualified convention or trade show activity. Free file 2011 taxes The exclusion of qualified convention or trade show activities from the definition of unrelated trade or business is explained later under Convention or trade show activity. Free file 2011 taxes Selling donated merchandise. Free file 2011 taxes   A trade or business that consists of selling merchandise, substantially all of which the organization received as gifts or contributions, is not an unrelated trade or business. Free file 2011 taxes For example, a thrift shop operated by a tax-exempt organization that sells donated clothes and books to the general public, with the proceeds going to the exempt organization, is not an unrelated trade or business. Free file 2011 taxes Employee association sales. Free file 2011 taxes   The sale of certain items by a local association of employees described in section 501(c)(4), organized before May 17, 1969, is not an unrelated trade or business if the items are sold for the convenience of the association's members at their usual place of employment. Free file 2011 taxes This exclusion applies only to the sale of work-related clothes and equipment and items normally sold through vending machines, food dispensing facilities, or by snack bars. Free file 2011 taxes Bingo games. Free file 2011 taxes   Certain bingo games are not included in the term “unrelated trade or business. Free file 2011 taxes ” To qualify for this exclusion, the bingo game must meet the following requirements. Free file 2011 taxes It meets the legal definition of bingo. Free file 2011 taxes It is legal where it is played. Free file 2011 taxes It is played in a jurisdiction where bingo games are not regularly conducted by for-profit organizations. Free file 2011 taxes Legal definition. Free file 2011 taxes   For a game to meet the legal definition of bingo, wagers must be placed, winners must be determined, and prizes or other property must be distributed in the presence of all persons placing wagers in that game. Free file 2011 taxes   A wagering game that does not meet the legal definition of bingo does not qualify for the exclusion, regardless of its name. Free file 2011 taxes For example, “instant bingo,” in which a player buys a pre-packaged bingo card with pull-tabs that the player removes to determine if he or she is a winner, does not qualify. Free file 2011 taxes Legal where played. Free file 2011 taxes   This exclusion applies only if bingo is legal under the laws of the jurisdiction where it is conducted. Free file 2011 taxes The fact that a jurisdiction's law that prohibits bingo is rarely enforced or is widely disregarded does not make the conduct of bingo legal for this purpose. Free file 2011 taxes No for-profit games where played. Free file 2011 taxes   This exclusion applies only if for-profit organizations cannot regularly conduct bingo games in any part of the same jurisdiction. Free file 2011 taxes Jurisdiction is normally the entire state; however, in certain situations, local jurisdiction will control. Free file 2011 taxes Example. Free file 2011 taxes Tax-exempt organizations X and Y are organized under the laws of state N, which has a law that permits exempt organizations to conduct bingo games. Free file 2011 taxes In addition, for-profit organizations are permitted to conduct bingo games in city S, a resort community located in county R. Free file 2011 taxes Several for-profit organizations conduct nightly games. Free file 2011 taxes Y conducts weekly bingo games in city S, while X conducts weekly games in county R. Free file 2011 taxes Since state law confines the for-profit organizations to city S, local jurisdiction controls. Free file 2011 taxes Y's bingo games conducted in city S are an unrelated trade or business. Free file 2011 taxes However, X's bingo games conducted in county R outside of city S are not an unrelated trade or business. Free file 2011 taxes Gambling activities other than bingo. Free file 2011 taxes   Any game of chance conducted by an exempt organization in North Dakota is not an unrelated trade or business if conducting the game does not violate any state or local law. Free file 2011 taxes Pole rentals. Free file 2011 taxes   The term unrelated trade or business does not include qualified pole rentals by a mutual or cooperative telephone or electric company described in section 501(c)(12). Free file 2011 taxes A qualified pole rental is the rental of a pole (or other structure used to support wires) if the pole (or other structure) is used: By the telephone or electric company to support one or more wires that the company uses in providing telephone or electric services to its members, and According to the rental, to support one or more wires (in addition to the wires described in 1 ) for use in connection with the transmission by wire of electricity or of telephone or other communications. Free file 2011 taxes For this purpose, the term rental includes any sale of the right to use the pole (or other structure). Free file 2011 taxes Distribution of low cost articles. Free file 2011 taxes   The term unrelated trade or business does not include activities relating to the distribution of low cost articles incidental to soliciting charitable contributions. Free file 2011 taxes This applies to organizations described in section 501 that are eligible to receive charitable contributions. Free file 2011 taxes   A distribution is considered incidental to the solicitation of a charitable contribution if: The recipient did not request the distribution, The distribution is made without the express consent of the recipient, and The article is accompanied by a request for a charitable contribution to the organization and a statement that the recipient may keep the low cost article regardless of whether a contribution is made. Free file 2011 taxes   An article is considered low cost if the cost of an item (or the aggregate costs if more than one item) distributed to a single recipient in a tax year is not more than $5, indexed annually for inflation. Free file 2011 taxes The maximum cost of a low cost article is $9. Free file 2011 taxes 70 for 2011. Free file 2011 taxes The cost of an article is the cost to the organization that distributes the item or on whose behalf it is distributed. Free file 2011 taxes Exchange or rental of member lists. Free file 2011 taxes   The exchange or rental of member or donor lists between organizations described in section 501 that are eligible to receive charitable contributions is not included in the term unrelated trade or business. Free file 2011 taxes Hospital services. Free file 2011 taxes   The providing of certain services at or below cost by an exempt hospital to other exempt hospitals that have facilities for 100 or fewer inpatients is not an unrelated trade or business. Free file 2011 taxes This exclusion applies only to services described in section 501(e)(1)(A). Free file 2011 taxes Public entertainment activity. Free file 2011 taxes   An unrelated trade or business does not include a qualified public entertainment activity. Free file 2011 taxes A public entertainment activity is one traditionally conducted at a fair or exposition promoting agriculture and education, including any activity whose purpose is designed to attract the public to fairs or expositions or to promote the breeding of animals or the development of products or equipment. Free file 2011 taxes   A qualified public entertainment activity is one conducted by a qualifying organization: In conjunction with an international, national, state, regional, or local fair or exposition; In accordance with state law that permits the activity to be operated or conducted solely by such an organization or by an agency, instrumentality, or political subdivision of the state; or In accordance with state law that permits an organization to be granted a license to conduct an activity for not more than 20 days on paying the state a lower percentage of the revenue from the activity than the state charges nonqualifying organizations that hold similar activities. Free file 2011 taxes   For these purposes, a qualifying organization is an organization described in section 501(c)(3), 501(c)(4), or 501(c)(5) that regularly conducts an agricultural and educational fair or exposition as one of its substantial exempt purposes. Free file 2011 taxes Its conducting qualified public entertainment activities will not affect determination of its exempt status. Free file 2011 taxes Convention or trade show activity. Free file 2011 taxes   An unrelated trade or business does not include qualified convention or trade show activities conducted at a convention, annual meeting, or trade show. Free file 2011 taxes   A qualified convention or trade show activity is any activity of a kind traditionally conducted by a qualifying organization in conjunction with an international, national, state, regional, or local convention, annual meeting, or show if: One of the purposes of the organization in sponsoring the activity is promoting and stimulating interest in, and demand for, the products and services of that industry or educating the persons in attendance regarding new products and services or new rules and regulations affecting the industry; and The show is designed to achieve its purpose through the character of the exhibits and the extent of the industry products that are displayed. Free file 2011 taxes   For these purposes, a qualifying organization is one described in section 501(c)(3), 501(c)(4), 501(c)(5), or 501(c)(6). Free file 2011 taxes The organization must regularly conduct, as one of its substantial exempt purposes, a qualified convention or trade show activity. Free file 2011 taxes   The rental of display space to exhibitors (including exhibitors who are suppliers) at a qualified convention or trade show is not an unrelated trade or business even if the exhibitors who rent the space are permitted to sell or solicit orders. Free file 2011 taxes For this purpose, a supplier's exhibit is one in which the exhibitor displays goods or services that are supplied to, rather than by, members of the qualifying organization in the conduct of these members' own trades or businesses. Free file 2011 taxes    Certain Internet activities conducted by a trade association described in section 501(c)(6) will be considered qualified convention and trade show activity if conducted on a special supplementary section of the association's website in conjunction with a trade show conducted by the association. Free file 2011 taxes The trade show itself must be a qualified convention and trade show activity. Free file 2011 taxes The supplementary section of the website must be ancillary to, and serve to augment and enhance, the trade show, as when it makes available the same information available at the trade show and is available only during a time period that coincides with the time period that the trade show is in operation. Free file 2011 taxes Conversely, Internet activities that are not conducted in conjunction with a qualified convention and trade show activity and that do not augment and enhance the trade show cannot themselves be qualified convention and trade show activity. Free file 2011 taxes Prev  Up  Next   Home   More Online Publications
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There are plenty of resources available to help you make health care decisions. Be wary of websites sponsored by companies that are trying to sell you a particular treatment. It's better to contact reputable associations or visit websites run by government agencies and recognized organizations, such as the Mayo Clinic and the American Medical Association (1-800-621-8335). This information should complement, not replace, what you  receive from a doctor. Here are some sites that are generally recognized as reliable information sources:

The Free File 2011 Taxes

Free file 2011 taxes 4. Free file 2011 taxes   Other Section 501(c) Organizations Table of Contents Introduction 501(c)(4) - Civic Leagues and Social Welfare OrganizationsSpecific Organizations 501(c)(5) - Labor, Agricultural and Horticultural OrganizationsLabor Organizations Agricultural and Horticultural Organizations 501(c)(6) - Business Leagues, etc. Free file 2011 taxes Line of business. Free file 2011 taxes Examples. Free file 2011 taxes Improvement of business conditions. Free file 2011 taxes Exception for local legislation. Free file 2011 taxes De minimis exception. Free file 2011 taxes Grass roots lobbying. Free file 2011 taxes 501(c)(7) - Social and Recreation ClubsLimited membership. Free file 2011 taxes Support. Free file 2011 taxes Facilities open to public. Free file 2011 taxes Gross receipts from nonmembership sources. Free file 2011 taxes Gross receipts. Free file 2011 taxes Nontraditional activities. Free file 2011 taxes 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal SocietiesFraternal Beneficiary Societies (501(c)(8)) Domestic Fraternal Societies (501(c)(10)) 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' AssociationsLocal Employees' Associations (501(c)(4)) Voluntary Employees' Beneficiary Associations (501(c)(9)) Supplemental Unemployment Benefit Trusts (501(c)(17)) 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like OrganizationsMembership. Free file 2011 taxes Losses and expenses. Free file 2011 taxes Distributions of proceeds. Free file 2011 taxes The 85% Requirement Local Life Insurance Associations Mutual or Cooperative Associations 501(c)(13) - Cemetery CompaniesBuying cemetery property. Free file 2011 taxes Perpetual care organization. Free file 2011 taxes Care of individual plots. Free file 2011 taxes 501(c)(14) - Credit Unions and Other Mutual Financial OrganizationsState-Chartered Credit Unions Other Mutual Financial Organizations 501(c)(19) - Veterans' Organizations 501(c)(20) - Group Legal Services Plan Organizations 501(c)(21) - Black Lung Benefit TrustsExcise taxes. Free file 2011 taxes 501(c)(2) - Title-Holding Corporations for Single Parent CorporationsExpenses. Free file 2011 taxes Waiver of payment of income. Free file 2011 taxes 501(c)(25) - Title-Holding Corporations or Trusts for Multiple Parent CorporationsUnrelated Business Income 501(c)(26) - State-Sponsored High-Risk Health Coverage Organizations 501(c)(27) - Qualified State-Sponsored Workers' Compensation Organizations 501(c)(29) - CO-OP Health Insurance Issuers New Guidance for IRC 501(c)(29) Qualified Nonprofit Health Insurance Issuers General Requirements for Exemption under 501(c)(29) and Annual Filing Requirement Additional Guidance for Prospective 501(c)(29) Organizations Introduction This chapter contains specific information for certain organizations described in section 501(c), other than those organizations that are described in section 501(c)(3). Free file 2011 taxes Section 501(c)(3) organizations are covered in chapter 3 of this publication. Free file 2011 taxes The Table of Contents at the beginning of this publication, as well as the Organization Reference Chart, may help you locate at a glance the type of organization discussed in this chapter. Free file 2011 taxes 501(c)(4) - Civic Leagues and Social Welfare Organizations If your organization is not organized for profit and will be operated primarily to promote social welfare to benefit the community, you should file Form 1024 to apply for recognition of exemption from federal income tax under section 501(c)(4). Free file 2011 taxes The discussion that follows describes the information you must provide when applying. Free file 2011 taxes For application procedures, see chapter 1. Free file 2011 taxes To qualify for exemption under section 501(c)(4), the organization's net earnings must be devoted primarily to charitable, educational, or recreational purposes. Free file 2011 taxes In addition, no part of the organization's net earnings can inure to the benefit of any private shareholder or individual. Free file 2011 taxes If the organization provides an excess benefit to certain persons, an excise tax may be imposed. Free file 2011 taxes See Excise tax on excess benefit transactions , under Excess Benefit Transactions in chapter 5 for more information about this tax. Free file 2011 taxes Examples. Free file 2011 taxes   Types of organizations that are considered to be social welfare organizations are civic associations and volunteer fire companies. Free file 2011 taxes Nonprofit operation. Free file 2011 taxes   You must submit evidence that your organization is organized and will be operated on a nonprofit basis. Free file 2011 taxes However, such evidence, including the fact that your organization is organized under a state law relating to nonprofit corporations, will not in itself establish a social welfare purpose. Free file 2011 taxes Social welfare. Free file 2011 taxes   To establish that your organization is organized primarily to promote social welfare, you should submit evidence with your application showing that your organization will operate primarily to further (in some way) the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements). Free file 2011 taxes   An organization that restricts the use of its facilities to employees of selected corporations and their guests is primarily benefiting a private group rather than the community. Free file 2011 taxes It therefore does not qualify as a section 501(c)(4) organization. Free file 2011 taxes Similarly, an organization formed to represent member-tenants of an apartment complex does not qualify, since its activities benefit the member-tenants and not all tenants in the community. Free file 2011 taxes However, an organization formed to promote the legal rights of all tenants in a particular community may qualify under section 501(c)(4) as a social welfare organization. Free file 2011 taxes Political activity. Free file 2011 taxes   Promoting social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Free file 2011 taxes However, if you submit proof that your organization is organized primarily to promote social welfare, it can obtain exemption even if it participates legally in some political activity on behalf of or in opposition to candidates for public office. Free file 2011 taxes See the discussion in chapter 2 under Political Organization Income Tax Return . Free file 2011 taxes Social or recreational activity. Free file 2011 taxes   If social activities will be the primary purpose of your organization, you should not file an application for exemption as a social welfare organization but should file for exemption as a social club described in section 501(c)(7). Free file 2011 taxes Retirement benefit program. Free file 2011 taxes   An organization established by its members that has as its primary activity providing supplemental retirement benefits to its members or death benefits to their beneficiaries does not qualify as an exempt social welfare organization. Free file 2011 taxes It may qualify under another paragraph of section 501(c) depending on all the facts. Free file 2011 taxes   However, a nonprofit association that is established, maintained, and funded by a local government to provide the only retirement benefits to a class of employees may qualify as a social welfare organization under section 501(c)(4). Free file 2011 taxes Tax treatment of donations. Free file 2011 taxes   Donations to volunteer fire companies are deductible on the donor's federal income tax return, but only if made for exclusively public purposes. Free file 2011 taxes Contributions to civic leagues or other section 501(c)(4) organizations generally are not deductible as charitable contributions for federal income tax purposes. Free file 2011 taxes They may be deductible as trade or business expenses, if ordinary and necessary in the conduct of the taxpayer's business. Free file 2011 taxes However, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. Free file 2011 taxes for more information. Free file 2011 taxes For more information on social welfare organizations, see Life Cycle of a Social Welfare Organization at IRS. Free file 2011 taxes gov. Free file 2011 taxes Specific Organizations The following information should be contained in the application form and accompanying statements of certain types of civic leagues or social welfare organizations. Free file 2011 taxes Volunteer fire companies. Free file 2011 taxes   If your organization wishes to obtain exemption as a volunteer fire company or similar organization, you should submit evidence that its members are actively engaged in fire fighting and similar disaster assistance, whether it actually owns the fire fighting equipment, and whether it provides any assistance for its members, such as death and medical benefits in case of injury to them. Free file 2011 taxes   If your organization does not have an independent social purpose, such as providing recreational facilities for members, it may be exempt under section 501(c)(3). Free file 2011 taxes In this event, your organization should file Form 1023. Free file 2011 taxes Homeowners' associations. Free file 2011 taxes   A membership organization formed by a real estate developer to own and maintain common green areas, streets, and sidewalks and to enforce covenants to preserve the appearance of the development should show that it is operated for the benefit of all the residents of the community. Free file 2011 taxes The term community generally refers to a geographical unit recognizable as a governmental subdivision, unit, or district thereof. Free file 2011 taxes Whether a particular association meets the requirement of benefiting a community depends on the facts and circumstances of each case. Free file 2011 taxes Even if an area represented by an association is not a community, the association can still qualify for exemption if its activities benefit a community. Free file 2011 taxes   The association should submit evidence that areas such as roadways and park land that it owns and maintains are open to the general public and not just its own members. Free file 2011 taxes It also must show that it does not engage in exterior maintenance of private homes. Free file 2011 taxes   A homeowners' association that is not exempt under section 501(c)(4) and that is a condominium management association, a residential real estate management association, or a timeshare association generally can elect under the provisions of section 528 to receive certain tax benefits that, in effect, permit it to exclude its exempt function income from its gross income. Free file 2011 taxes Other organizations. Free file 2011 taxes   Other nonprofit organizations that qualify as social welfare organizations include: An organization operating an airport that is on land owned by a local government, which supervises the airport's operation, and that serves the general public in an area with no other airport, A community association that works to improve public services, housing, and residential parking; publishes a free community newspaper; sponsors a community sports league, holiday programs, and meetings; and contracts with a private security service to patrol the community, A community association devoted to preserving the community's traditions, architecture, and appearance by representing it before the local legislature and administrative agencies in zoning, traffic, and parking matters, An organization that tries to encourage industrial development and relieve unemployment in an area by making loans to businesses so they will relocate to the area, and An organization that holds an annual festival of regional customs and traditions. Free file 2011 taxes 501(c)(5) - Labor, Agricultural and Horticultural Organizations If you are a member of an organization that wants to obtain recognition of exemption from federal income tax as a labor, agricultural, or horticultural organization, you should submit an application on Form 1024. Free file 2011 taxes You must indicate in your application for exemption and accompanying statements that no part of the organization's net earnings will inure to the benefit of any member. Free file 2011 taxes In addition, you should follow the procedure for obtaining recognition of exempt status described in chapter 1. Free file 2011 taxes Submit any additional information that may be required, as described in this section. Free file 2011 taxes Tax treatment of donations. Free file 2011 taxes   Contributions to labor, agricultural, and horticultural organizations are not deductible as charitable contributions on the donor's federal income tax return. Free file 2011 taxes However, such payments may be deductible as business expenses if they are ordinary and necessary in the conduct of the taxpayer's trade or business. Free file 2011 taxes For more information about certain limits affecting the deductibility of these business expenses, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. Free file 2011 taxes Labor Organizations A labor organization is an association of workers who have combined to protect and promote the interests of the members by bargaining collectively with their employers to secure better working conditions. Free file 2011 taxes To show that your organization has the purpose of a labor organization, you should include in the articles of organization or accompanying statements (submitted with your exemption application) information establishing that the organization is organized to better the conditions of workers, improve the grade of their products, and develop a higher degree of efficiency in their respective occupations. Free file 2011 taxes In addition, no net earnings of the organization can inure to the benefit of any member. Free file 2011 taxes Composition of membership. Free file 2011 taxes   While a labor organization generally is composed of employees or representatives of the employees (in the form of collective bargaining agents) and similar employee groups, evidence that an organization's membership consists mainly of workers does not in itself indicate an exempt purpose. Free file 2011 taxes You must show in your application that your organization has the purposes described in the preceding paragraph. Free file 2011 taxes These purposes can be accomplished by a single labor organization acting alone or by several organizations acting together through a separate organization. Free file 2011 taxes Benefits to members. Free file 2011 taxes   The payment by a labor organization of death, sick, accident, and similar benefits to its individual members with funds contributed by its members, if made under a plan to better the conditions of the members, does not preclude exemption as a labor organization. Free file 2011 taxes However, an organization does not qualify for exemption as a labor organization if it has no authority to represent members in job-related matters, even if it provides weekly income to its members in the event of a lawful strike by the members' union, in return for an annual payment by the member. Free file 2011 taxes   For more information on labor organizations, see Life Cycle of a Labor Organization at IRS. Free file 2011 taxes gov. Free file 2011 taxes Agricultural and Horticultural Organizations Agricultural and horticultural organizations are connected with raising livestock, forestry, cultivating land, raising and harvesting crops or aquatic resources, cultivating useful or ornamental plants, and similar pursuits. Free file 2011 taxes For the purpose of these provisions, aquatic resources include only animal or vegetable life, but not mineral resources. Free file 2011 taxes The term harvesting, in this case, includes fishing and related pursuits. Free file 2011 taxes Agricultural organizations can be quasi-public in character and are often designed to encourage the development of better agricultural and horticultural products through a system of awards, using income from entry fees, gate receipts, and donations to meet the necessary expenses of upkeep and operation. Free file 2011 taxes When the activities are directed toward the improvement of marketing or other business conditions in one or more lines of business, rather than the improvement of production techniques or the betterment of the conditions of persons engaged in agriculture, the organization must qualify for exemption as a business league, board of trade, or other organization, as discussed next in the section on 501(c)(6) organizations. Free file 2011 taxes The primary purpose of exempt agricultural and horticultural organizations must be to better the conditions of those engaged in agriculture or horticulture, develop more efficiency in agriculture or horticulture, or improve the products. Free file 2011 taxes The following list contains some examples of activities that show an agricultural or horticultural purpose. Free file 2011 taxes Promoting various cooperative agricultural, horticultural, and civic activities among rural residents by a state, farm, or home bureau. Free file 2011 taxes Exhibiting livestock, farm products, and other characteristic features of agriculture and horticulture. Free file 2011 taxes Testing soil for members and nonmembers of the farm bureau on a cost basis, the results of the tests and other recommendations being furnished to the community members to educate them in soil treatment. Free file 2011 taxes Guarding the purity of a specific breed of livestock. Free file 2011 taxes Encouraging improvements in the production of fish on privately owned fish farms. Free file 2011 taxes Negotiating with processors for the price to be paid to members for their crops. Free file 2011 taxes For more information on agricultural or horticultural organizations, see Life Cycle of an Agricultural or Horticultural Organization at IRS. Free file 2011 taxes gov. Free file 2011 taxes 501(c)(6) - Business Leagues, etc. Free file 2011 taxes If your association wants to apply for recognition of exemption from federal income tax as a nonprofit business league, chamber of commerce, real estate board, or board of trade, it should file Form 1024. Free file 2011 taxes For a discussion of the procedure to follow, see chapter 1. Free file 2011 taxes Your organization must indicate in its application form and attached statements that no part of its net earnings will inure to the benefit of any private shareholder or individual and that it is not organized for profit or organized to engage in an activity ordinarily carried on for profit (even if the business is operated on a cooperative basis or produces only sufficient income to be self-sustaining). Free file 2011 taxes In addition, your organization must be primarily engaged in activities or functions that are the basis for its exemption. Free file 2011 taxes It must be primarily supported by membership dues and other income from activities substantially related to its exempt purpose. Free file 2011 taxes A business league, in general, is an association of persons having some common business interest, the purpose of which is to promote that common interest and not to engage in a regular business of a kind ordinarily carried on for profit. Free file 2011 taxes Trade associations and professional associations are considered business leagues. Free file 2011 taxes Chamber of commerce. Free file 2011 taxes   A chamber of commerce usually is composed of the merchants and traders of a city. Free file 2011 taxes Board of trade. Free file 2011 taxes   A board of trade often consists of persons engaged in similar lines of business. Free file 2011 taxes For example, a nonprofit organization formed to regulate the sale of a specified agricultural commodity to assure equal treatment of producers, warehouse workers, and buyers is a board of trade. Free file 2011 taxes   Chambers of commerce and boards of trade usually promote the common economic interests of all the commercial enterprises in a given trade community. Free file 2011 taxes Real estate board. Free file 2011 taxes   A real estate board consists of members interested in improving the business conditions in the real estate field. Free file 2011 taxes It is not organized for profit and no part of the net earnings inures to the benefit of any private shareholder or individual. Free file 2011 taxes Professional football leagues. Free file 2011 taxes   The Internal Revenue Code specifically defines professional football leagues as exempt organizations under section 501(c)(6). Free file 2011 taxes They are exempt whether or not they administer a pension fund for football players. Free file 2011 taxes General purpose. Free file 2011 taxes   You must indicate in the material submitted with your application that your organization will be devoted to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons. Free file 2011 taxes It must be shown that the conditions of a particular trade or the interests of the community will be advanced. Free file 2011 taxes Merely indicating the name of the organization or the object of the local statute under which it is created is not enough to demonstrate the required general purpose. Free file 2011 taxes Line of business. Free file 2011 taxes   This term generally refers either to an entire industry or to all components of an industry within a geographic area. Free file 2011 taxes It does not include a group composed of businesses that market a particular brand within an industry. Free file 2011 taxes Common business interest. Free file 2011 taxes   A common business interest of all members of the organization must be established by the application documents. Free file 2011 taxes Examples. Free file 2011 taxes   Activities that would tend to illustrate a common business interest are: Promotion of higher business standards and better business methods and encouragement of uniformity and cooperation by a retail merchants association, Education of the public in the use of credit, Establishment of uniform casualty rates and compilation of statistical information by an insurance rating bureau operated by casualty insurance companies, Establishment and maintenance of the integrity of a local commercial market, Operation of a trade publication primarily intended to benefit an entire industry, and Encouragement of the use of goods and services of an entire industry (such as a lawyer referral service whose main purpose is to introduce individuals to the use of the legal profession in the hope that they will enter into lawyer-client relationships on a paying basis as a result). Free file 2011 taxes Improvement of business conditions. Free file 2011 taxes   Generally, this must be shown to be the purpose of the organization. Free file 2011 taxes This is not established by evidence of particular services that provide a convenience or economy to individual members in their businesses, such as advertising that carries the name of members, interest-free loans, assigning exclusive franchise areas, operation of a real estate multiple listing system, or operation of a credit reporting agency. Free file 2011 taxes Stock or commodity exchange. Free file 2011 taxes   A stock or commodity exchange is not a business league, chamber of commerce, real estate board, or board of trade and is not exempt under section 501(c)(6). Free file 2011 taxes Legislative activity. Free file 2011 taxes   An organization that is exempt under section 501(c)(6) can work for the enactment of laws to advance the common business interests of the organization's members. Free file 2011 taxes Deduction not allowed for dues used for political or legislative activities. Free file 2011 taxes   A taxpayer cannot deduct the part of dues or other payments to a business league, trade association, labor union, or similar organization that is reported to the taxpayer by the organization as having been used for any of the following activities. Free file 2011 taxes Influencing legislation. Free file 2011 taxes Participating or intervening in a political campaign for, or against, any candidate for public office. Free file 2011 taxes Trying to influence the general public, or part of the general public, with respect to elections, legislative matters, or referendums (also known as grass roots lobbying). Free file 2011 taxes Communicating directly with certain executive branch officials to try to influence their official actions or positions. Free file 2011 taxes See Dues Used for Lobbying or Political Activities under Required Disclosures in chapter 2 for more information. Free file 2011 taxes Exception for local legislation. Free file 2011 taxes   Members can deduct dues (or assessments) to an organization that are for expenses of: Appearing before, submitting statements to, or sending communications to members of a local council or similar governing body with respect to legislation or proposed legislation of direct interest to the member, or Communicating information between the member and the organization with respect to local legislation or proposed legislation of direct interest to the organization or the member. Free file 2011 taxes Legislation or proposed legislation is of direct interest to a taxpayer if it will, or can reasonably be expected to, affect the taxpayer's trade or business. Free file 2011 taxes De minimis exception. Free file 2011 taxes   In-house expenditures of $2,000 or less for the year for activities (1) – (4) listed earlier will not prevent a deduction for dues if the dues meet all other tests to be deductible as a business expense. Free file 2011 taxes Grass roots lobbying. Free file 2011 taxes   A tax-exempt trade association, labor union, or similar organization is considered to be engaging in grass roots lobbying if it contacts prospective members or calls upon its own members to contact their employees and customers for the purpose of urging such persons to communicate with their elected state or Congressional representatives to support the promotion, defeat, or repeal of legislation that is of direct interest to the organization. Free file 2011 taxes Any dues or assessments directly related to such activities are not deductible by the taxpayer, since the individuals being contacted, who are not members of the organization, are a segment of the general public. Free file 2011 taxes Tax treatment of donations. Free file 2011 taxes   Contributions to organizations described in this section are not deductible as charitable contributions on the donor's federal income tax return. Free file 2011 taxes They may be deductible as trade or business expenses if ordinary and necessary in the conduct of the taxpayer's business. Free file 2011 taxes   For more information on business leagues, see Life Cycle of a Business League (Trade Association) on IRS. Free file 2011 taxes gov. Free file 2011 taxes 501(c)(7) - Social and Recreation Clubs If your club is organized for pleasure, recreation, and other similar nonprofitable purposes and substantially all of its activities are for these purposes, it should file Form 1024 to apply for recognition of exemption from federal income tax. Free file 2011 taxes In applying for recognition of exemption, you should submit the information described in this section. Free file 2011 taxes Also see chapter 1 for the procedures to follow. Free file 2011 taxes Typical organizations that should file for recognition of exemption as social clubs include: College alumni associations that are not described in chapter 3 under Alumni association , College fraternities or sororities operating chapter houses for students, Country clubs, Amateur hunting, fishing, tennis, swimming, and other sport clubs, Dinner clubs that provide a meeting place, library, and dining room for members, Hobby clubs, Garden clubs, and Variety clubs. Free file 2011 taxes Discrimination prohibited. Free file 2011 taxes   Your organization will not be recognized as tax exempt if its charter, bylaws, or other governing instrument, or any written policy statement provides for discrimination against any person on the basis of race, color, or religion. Free file 2011 taxes   However, a club that in good faith limits its membership to the members of a particular religion to further the teachings or principles of that religion and not to exclude individuals of a particular race or color will not be considered as discriminating on the basis of religion. Free file 2011 taxes Also, the restriction on religious discrimination does not apply to a club that is an auxiliary of a fraternal beneficiary society (discussed later) if that society is described in section 501(c)(8) and exempt from tax under section 501(a) and limits its membership to the members of a particular religion. Free file 2011 taxes Private benefit prohibited. Free file 2011 taxes   No part of the organization's net earnings can inure to the benefit of any person having a personal and private interest in the activities of the organization. Free file 2011 taxes For purposes of this requirement, it is not necessary that net earnings be actually distributed. Free file 2011 taxes Even undistributed earnings can benefit members. Free file 2011 taxes Examples of this include a decrease in membership dues or an increase in the services the club provides to its members without a corresponding increase in dues or other fees paid for club support. Free file 2011 taxes However, fixed-fee payments to members who bring new members into the club are not an inurement of the club's net earnings, if the payments are reasonable compensation for performance of a necessary administrative service. Free file 2011 taxes Purposes. Free file 2011 taxes   To show that your organization possesses the characteristics of a club within the meaning of the exemption law, you should submit evidence with your application that personal contact, commingling, and fellowship exist among members. Free file 2011 taxes You must show that members are bound together by a common objective of pleasure, recreation, and other nonprofitable purposes. Free file 2011 taxes   Fellowship need not be present between each member and every other member of a club if it is a material part in the life of the organization. Free file 2011 taxes A statewide or nationwide organization that is made up of individual members, but is divided into local groups, satisfies this requirement if fellowship is a material part of the life of each local group. Free file 2011 taxes   The term other nonprofitable purposes means other purposes similar to pleasure and recreation. Free file 2011 taxes For example, a club that, in addition to its social activities, has a plan for the payment of sick and death benefits is not operating exclusively for pleasure, recreation, and other nonprofitable purposes. Free file 2011 taxes Limited membership. Free file 2011 taxes   The membership in a social club must be limited. Free file 2011 taxes To show that your organization has a purpose that would characterize it as a club, you should submit evidence with your application that there are limits on admission to membership consistent with the character of the club. Free file 2011 taxes   A social club that issues corporate membership is dealing with the general public in the form of the corporation's employees. Free file 2011 taxes Corporate members of a club are not the kind of members contemplated by the law. Free file 2011 taxes Gross receipts from these members would be a factor in determining whether the club qualifies as a social club. Free file 2011 taxes See Gross receipts from nonmembership sources , later. Free file 2011 taxes Bona fide individual memberships paid for by a corporation would not have an effect on the gross receipts source. Free file 2011 taxes   The fact that a social club may have an associate (nonvoting) class of membership will not be, in and of itself, a cause for nonrecognition of exemption. Free file 2011 taxes However, if one membership class pays substantially lower dues and fees than another membership class, although both classes enjoy the same rights and privileges in using the club facilities, there may be an inurement of income to the benefited class, resulting in a denial of the club's exemption. Free file 2011 taxes Support. Free file 2011 taxes   In general, your club should be supported solely by membership fees, dues, and assessments. Free file 2011 taxes However, if otherwise entitled to exemption, your club will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities. Free file 2011 taxes Business activities. Free file 2011 taxes   If your club will engage in business, such as selling real estate, timber, or other products or services, it generally will be denied exemption. Free file 2011 taxes However, evidence submitted with your application form that your organization will provide meals, refreshments, or services related to its exempt purposes only to its own members or their dependents or guests will not cause denial of exemption. Free file 2011 taxes Facilities open to public. Free file 2011 taxes   Evidence that your club's facilities will be open to the general public (persons other than members or their dependents or guests) may cause denial of exemption. Free file 2011 taxes This does not mean, however, that any dealing with outsiders will automatically deprive a club of exemption. Free file 2011 taxes Gross receipts from nonmembership sources. Free file 2011 taxes   A section 501(c)(7) organization can receive up to 35% of its gross receipts, including investment income, from sources outside of its membership without losing its tax-exempt status. Free file 2011 taxes Income from nontraditional business activity with members is not exempt function income, and thus is included as income from sources outside of the membership. Free file 2011 taxes Of the 35% gross receipts listed above, up to 15% of the gross receipts can be derived from the use of the club's facilities or services by the general public. Free file 2011 taxes If an organization has outside income that is more than these limits, all the facts and circumstances will be taken into account in determining whether the organization qualifies for exempt status. Free file 2011 taxes Gross receipts. Free file 2011 taxes   Gross receipts, for this purpose, are receipts from the normal and usual (traditionally conducted) activities of the club. Free file 2011 taxes These receipts include charges, admissions, membership fees, dues, assessments, investment income, and normal recurring capital gains on investments. Free file 2011 taxes Receipts do not include initiation fees and capital contributions. Free file 2011 taxes Unusual amounts of income, such as from the sale of a clubhouse or similar facility, are not included in gross receipts or in figuring the percentage limits. Free file 2011 taxes Nontraditional activities. Free file 2011 taxes   Activities conducted by a social club need to further its exempt purposes. Free file 2011 taxes Traditional business activities are those that further a social club's exempt purposes. Free file 2011 taxes Nontraditional business activities do not further the exempt purposes of a social club even if conducted solely on a membership basis. Free file 2011 taxes Nontraditional business activities are prohibited (subject to an insubstantial, trivial, and nonrecurrent test) for businesses conducted with both members and nonmembers. Free file 2011 taxes Examples of nontraditional business activities include sale of package liquor, take-out food, and long-term room rental. Free file 2011 taxes Fraternity foundations. Free file 2011 taxes   If your organization is a foundation formed for the exclusive purpose of acquiring and leasing a chapter house to a local fraternity chapter or sorority chapter maintained at an educational institution and does not engage in any social or recreational activities, it may be a title holding corporation (discussed later under section 501(c)(2) organizations and under section 501(c)(25) organizations) rather than a social club. Free file 2011 taxes Tax treatment of donations. Free file 2011 taxes   Donations to exempt social and recreation clubs are not deductible as charitable contributions on the donor's federal income tax return. Free file 2011 taxes 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal Societies This section describes the information to be provided upon application for recognition of exemption by two types of fraternal societies: beneficiary and domestic. Free file 2011 taxes The major distinction is that fraternal beneficiary societies provide for the payment of life, sick, accident, or other benefits to their members or their dependents, while domestic fraternal societies do not provide these benefits but rather devote their earnings to fraternal, religious, charitable, etc. Free file 2011 taxes , purposes. Free file 2011 taxes The procedures to follow in applying for recognition of exemption are described in chapter 1. Free file 2011 taxes If your organization is controlled by a central organization, you should check with your controlling organization to determine whether your unit has been included in a group exemption letter or can be added. Free file 2011 taxes If so, your organization need not apply for individual recognition of exemption. Free file 2011 taxes For more information, see Group Exemption Letter in chapter 1 of this publication. Free file 2011 taxes Tax treatment of donations. Free file 2011 taxes   Donations by an individual to a domestic fraternal beneficiary society or a domestic fraternal society operating under the lodge system are deductible as charitable contributions only if used exclusively for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals. Free file 2011 taxes Fraternal Beneficiary Societies (501(c)(8)) A fraternal beneficiary society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. Free file 2011 taxes The application and accompanying statements should establish that the organization: Is a fraternal organization, Operates under the lodge system or for the exclusive benefit of the members of a fraternal organization itself operating under the lodge system, and Provides for the payment of life, sick, accident, or other benefits to the members of the society, order, or association or their dependents. Free file 2011 taxes Lodge system. Free file 2011 taxes   Operating under the lodge system means carrying on activities under a form of organization that comprises local branches, chartered by a parent organization and largely self-governing, called lodges, chapters, or the like. Free file 2011 taxes Payment of benefits. Free file 2011 taxes   It is not essential that every member be covered by the society's program of sick, accident, or death benefits. Free file 2011 taxes An organization can qualify for exemption if most of its members are eligible for benefits, and the benefits are paid from contributions or dues paid by those members. Free file 2011 taxes   The benefits must be limited to members and their dependents. Free file 2011 taxes If members will have the ability to confer benefits to other than themselves and their dependents, exemption will not be recognized. Free file 2011 taxes Whole-life insurance. Free file 2011 taxes   Whole-life insurance constitutes a life benefit under section 501(c)(8) even though the policy may contain investment features such as a cash surrender value or a policy loan. Free file 2011 taxes Reinsurance pool. Free file 2011 taxes   Payments by a fraternal beneficiary society into a state-sponsored reinsurance pool that protects participating insurers against excessive losses on major medical health and accident insurance will not preclude exemption as a fraternal beneficiary society. Free file 2011 taxes Domestic Fraternal Societies (501(c)(10)) A domestic fraternal society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. Free file 2011 taxes The application and accompanying statements should establish that the organization: Is a domestic fraternal organization organized in the U. Free file 2011 taxes S. Free file 2011 taxes , Operates under the lodge system, Devotes its net earnings exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes, and Does not provide for the payment of life, sick, accident, or other benefits to its members. Free file 2011 taxes The organization can arrange with insurance companies to provide optional insurance to its members without jeopardizing its exempt status. Free file 2011 taxes 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' Associations This section describes the information to be provided upon application for recognition of exemption by the following types of employees' associations: A voluntary employees' beneficiary association (including federal employees' associations) organized to pay life, sick, accident, and similar benefits to members or their dependents, or designated beneficiaries, if no part of the net earnings of the association inures to the benefit of any private shareholder or individual, and A supplemental unemployment benefit trust whose primary purpose is providing for payment of supplemental unemployment benefits. Free file 2011 taxes Both the application form to file and the information to provide are discussed later under the section that describes your employee association. Free file 2011 taxes Chapter 1 describes the procedures to follow in applying for exemption. Free file 2011 taxes Tax treatment of donations. Free file 2011 taxes   Donations to these organizations are not deductible as charitable contributions on the donor's federal income tax return. Free file 2011 taxes Local Employees' Associations (501(c)(4)) A local association of employees whose membership is limited to employees of a designated person or persons in a particular municipality, and whose income will be devoted exclusively to charitable, educational, or recreational purposes. Free file 2011 taxes A local employees' association must apply for recognition of exemption by filing Form 1024. Free file 2011 taxes The organization must submit evidence that: It is of a purely local character, Its membership is limited to employees of a designated person or persons in a particular locality, and Its net earnings will be devoted exclusively to charitable, educational, or recreational purposes. Free file 2011 taxes A local association of employees that has established a system of paying retirement or death benefits, or both, to its members will not qualify for exemption since the payment of these benefits is not considered as being for charitable, educational, or recreational purposes. Free file 2011 taxes Similarly, a local association of employees that is operated primarily as a cooperative buying service for its members in order to obtain discount prices on merchandise, services, and activities does not qualify for exemption. Free file 2011 taxes Voluntary Employees' Beneficiary Associations (501(c)(9)) An application for recognition of exemption as a voluntary employees' beneficiary association must be filed on Form 1024. Free file 2011 taxes The material submitted with the application must show that your organization: Is a voluntary association of employees, Will provide for payment of life, sick, accident, or other benefits to members or their dependents or designated beneficiaries and substantially all of its operations are for this purpose, and Will not allow any of its net earnings to inure to the benefit of any private individual or shareholder except in the form of scheduled benefit payments. Free file 2011 taxes To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. Free file 2011 taxes Note. Free file 2011 taxes Under section 4976, the reversion of funds from a section 501(c)(9) organization to the employer who created the beneficiary association may subject the employer to a 100% penalty excise tax on the amount of the reversion. Free file 2011 taxes Notice requirement. Free file 2011 taxes   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. Free file 2011 taxes The organization gives notice by filing Form 1024. Free file 2011 taxes If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before notice is given. Free file 2011 taxes An extension of time for filing the notice can be granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . Free file 2011 taxes Membership. Free file 2011 taxes   Membership of a section 501(c)(9) organization must consist of individuals who are employees and have an employment-related common bond. Free file 2011 taxes This common bond can be a common employer (or affiliated employers), coverage under one or more collective bargaining agreements, membership in a labor union, or membership in one or more locals of a national or international labor union. Free file 2011 taxes   The membership of an association can include some individuals who are not employees, provided they have an employment-related bond with the employee-members. Free file 2011 taxes For example, the owner of a business whose employees are members of the association can be a member. Free file 2011 taxes An association will be considered composed of employees if 90% of its total membership on one day of each quarter of its tax year consists of employees. Free file 2011 taxes Employees. Free file 2011 taxes   Employees include individuals who became entitled to membership because they are or were employees. Free file 2011 taxes For example, an individual will qualify as an employee even though the individual is on a leave of absence or has been terminated due to retirement, disability, or layoff. Free file 2011 taxes   Generally, membership is voluntary if an affirmative act is required on the part of an employee to become a member. Free file 2011 taxes Conversely, membership is involuntary if the designation as a member is due to employee status. Free file 2011 taxes However, an association will be considered voluntary if employees are required to be members of the organization as a condition of their employment and they do not incur a detriment (such as a payroll deduction) as a result of their membership. Free file 2011 taxes An employer has not imposed involuntary membership on the employee if membership is required as the result of a collective bargaining agreement or as an incident of membership in a labor organization. Free file 2011 taxes Payment of benefits. Free file 2011 taxes   The information submitted with your application must show that your organization will pay life, sick, accident, supplemental unemployment, or other similar benefits. Free file 2011 taxes The benefits can be provided directly by your association or indirectly by your association through the payments of premiums to an insurance company (or fees to a medical clinic). Free file 2011 taxes Benefits can be in the form of medical, clinical, or hospital services, transportation furnished for medical care, or money payments. Free file 2011 taxes Nondiscrimination requirements. Free file 2011 taxes   An organization that is part of a plan will not be exempt unless the plan meets certain nondiscrimination requirements. Free file 2011 taxes However, if the organization is part of a plan that is a collective bargaining agreement that was the subject of good faith bargaining between employee organizations and employers, the plan need not meet these requirements for the organization to qualify as tax exempt. Free file 2011 taxes   A plan meets the nondiscrimination requirements only if both of the following statements are true. Free file 2011 taxes Each class of benefits under the plan is provided under a classification of employees that is set forth in the plan and does not discriminate in favor of employees who are highly compensated individuals. Free file 2011 taxes The benefits provided under each class of benefits do not discriminate in favor of highly compensated individuals. Free file 2011 taxes A life insurance, disability, severance pay, or supplemental unemployment compensation benefit does not discriminate in favor of highly compensated individuals merely because the benefits available bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of employees covered by the plan. Free file 2011 taxes   For purposes of determining whether a plan meets the nondiscrimination requirements, the employer can elect to exclude all disability or severance payments payable to individuals who are in pay status as of January 1, 1985. Free file 2011 taxes This will not apply to any increase in such payment by any plan amendment adopted after June 22, 1984. Free file 2011 taxes   If a plan provides a benefit for which there is a nondiscrimination provision provided under Chapter 1 of the Internal Revenue Code as a condition of that benefit being excluded from gross income, these nondiscrimination requirements do not apply. Free file 2011 taxes The benefit will be considered nondiscriminatory only if it meets the nondiscrimination provision of the applicable Code section. Free file 2011 taxes For example, benefits provided under a medical reimbursement plan would meet the nondiscrimination requirements for an association, if the benefits meet the nondiscrimination requirements of section 105(h)(3) and 105(h)(4). Free file 2011 taxes Excluded employees. Free file 2011 taxes   Certain employees who are not covered by a plan can be excluded from consideration in applying these requirements. Free file 2011 taxes These include employees: Who have not completed 3 years of service, Who have not attained age 21, Who are seasonal or less than half-time employees, Who are not in the plan and who are included in a unit of employees covered by a collective bargaining agreement if the class of benefits involved was the subject of good faith bargaining, or Who are nonresident aliens and who receive no earned income from the employer that has United States source income. Free file 2011 taxes Highly compensated individual. Free file 2011 taxes   A highly compensated individual is one who: Owned 5 percent or more of the employer at any time during the current year or the preceding year, Received more than $115,000 in compensation from the employer for the preceding year (the amount is annualized for inflation. Free file 2011 taxes Go to IRS. Free file 2011 taxes gov, and search “Pension Plan Limitation” for the year), and Was among the top 20% of employees by compensation for the preceding year. Free file 2011 taxes However, the employer can choose not to have (3) apply. Free file 2011 taxes Aggregation rules. Free file 2011 taxes   The employer can choose to treat two or more plans as one plan for purposes of meeting the nondiscrimination requirements. Free file 2011 taxes Employees of controlled groups of corporations, trades, or businesses under common control, or members of an affiliated service group, are treated as employees of a single employer. Free file 2011 taxes Leased employees are treated as employees of the recipient. Free file 2011 taxes One employee. Free file 2011 taxes   A trust created to provide benefits to one employee will not qualify as a voluntary employees' beneficiary association under section 501(c)(9). Free file 2011 taxes Supplemental Unemployment Benefit Trusts (501(c)(17)) A trust or trusts forming part of a written plan (established and maintained by an employer, his or her employees, or both) providing solely for the payment of supplemental unemployment compensation benefits must file the application for recognition of exemption on Form 1024. Free file 2011 taxes The trust must be a valid, existing trust under local law and must be evidenced by an executed document. Free file 2011 taxes A conformed copy of the plan of which the trust is a part should be attached to the application. Free file 2011 taxes To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. Free file 2011 taxes Note. Free file 2011 taxes Under section 4976, the reversion of funds from a section 501(c)(17) organization to the employer who created the supplemental unemployment benefit trust may subject the employer to a 100% penalty excise tax on the amount of the reversion. Free file 2011 taxes Notice requirement. Free file 2011 taxes   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. Free file 2011 taxes The organization gives notice by filing Form 1024. Free file 2011 taxes If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before such notice is given. Free file 2011 taxes An extension of time for filing the notice is granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . Free file 2011 taxes Types of payments. Free file 2011 taxes   You must show that the supplemental unemployment compensation benefits will be benefits paid to an employee because of the employee's involuntary separation from employment (whether or not the separation is temporary) resulting directly from a reduction-in-force, discontinuance of a plant or operation, or other similar conditions. Free file 2011 taxes In addition, sickness and accident benefits (but not vacation, retirement, or death benefits) may be included in the plan if these are subordinate to the unemployment compensation benefits. Free file 2011 taxes Diversion of funds. Free file 2011 taxes   It must be impossible under the plan (at any time before the satisfaction of all liabilities with respect to employees under the plan) to use or to divert any of the corpus or income of the trust to any purpose other than the payment of supplemental unemployment compensation benefits (or sickness or accident benefits to the extent just explained). Free file 2011 taxes Discrimination in benefits. Free file 2011 taxes   Neither the terms of the plan nor the actual payment of benefits can be discriminatory in favor of the company's officers, stockholders, supervisors, or highly paid employees. Free file 2011 taxes However, a plan is not discriminatory merely because benefits bear a uniform relationship to compensation or the rate of compensation. Free file 2011 taxes Prohibited transactions and exemption. Free file 2011 taxes   If your organization is a supplemental unemployment benefit trust and has received a denial of exemption because it engaged in a prohibited transaction, as defined by section 503(b), it can file a claim for exemption in any tax year following the tax year in which the notice of denial was issued. Free file 2011 taxes It must file the claim on Form 1024. Free file 2011 taxes The organization must include a written declaration that it will not knowingly again engage in a prohibited transaction. Free file 2011 taxes An authorized principal officer of your organization must make this declaration under the penalties of perjury. Free file 2011 taxes   If your organization has satisfied all requirements as a supplemental unemployment benefit trust described in section 501(c)(17), it will be notified in writing that it has been recognized as exempt. Free file 2011 taxes However, the organization will be exempt only for those tax years after the tax year in which the claim for exemption (Form 1024) is filed. Free file 2011 taxes Tax year in this case means the established annual accounting period of the organization or, if the organization has not established an annual accounting period, the calendar year. Free file 2011 taxes For more information about the requirements for reestablishing an exemption previously denied, contact the IRS. Free file 2011 taxes 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like Organizations Each of the following organizations apply for recognition of exemption from federal income tax by filing Form 1024. Free file 2011 taxes Benevolent life insurance associations of a purely local character and like organizations. Free file 2011 taxes Mutual ditch or irrigation companies and like organizations. Free file 2011 taxes Mutual or cooperative telephone companies and like organizations. Free file 2011 taxes A like organization is an organization that performs a service comparable to that performed by any one of the above organizations. Free file 2011 taxes The information to be provided upon application by each of these organizations is described in this section. Free file 2011 taxes For information as to the procedures to follow in applying for exemption, see chapter 1. Free file 2011 taxes General requirements. Free file 2011 taxes   These organizations must use their income solely to cover losses and expenses, with any excess being returned to members or retained to cover future losses and expenses. Free file 2011 taxes They must collect at least 85% of their income from members for the sole purpose of meeting losses and expenses. Free file 2011 taxes Mutual character. Free file 2011 taxes   These organizations, other than benevolent life insurance associations, must be organized and operated on a mutual or cooperative basis. Free file 2011 taxes They are associations of persons or organizations, or both, banded together to provide themselves a mutually desirable service approximately at cost and on a mutual basis. Free file 2011 taxes To maintain the mutual characteristic of democratic ownership and control, they must be so organized and operated that their members have the right to choose the management, to receive services at cost, to receive a return of any excess of payments over losses and expenses, and to share in any assets upon dissolution. Free file 2011 taxes   The rights and interests of members in the annual savings of the organization must be determined in proportion to their business with the organization. Free file 2011 taxes Upon dissolution, gains from the sale of appreciated assets must be distributed to all persons who were members during the period the assets were owned by the organization in proportion to the amount of business done during that period. Free file 2011 taxes The bylaws must not provide for forfeiture of a member's rights and interest upon withdrawal or termination. Free file 2011 taxes Membership. Free file 2011 taxes   Membership of a mutual organization consists of those who join the organization to obtain its services, and have a voice in its management. Free file 2011 taxes In a stock company, the stockholders are members. Free file 2011 taxes However, a mutual life insurance organization cannot have policyholders other than its members. Free file 2011 taxes Losses and expenses. Free file 2011 taxes   In furnishing services substantially at cost, an organization must use its income solely for paying losses and expenses. Free file 2011 taxes Any excess income not retained in reasonable reserves for future losses and expenses belongs to members in proportion to their patronage or business done with the organization. Free file 2011 taxes If such patronage refunds are retained in reasonable amounts for purposes of expanding and improving facilities, retiring capital indebtedness, acquiring other assets, and unexpected expenses, the organization must maintain records sufficient to reflect the equity of each member in the assets acquired with the funds. Free file 2011 taxes Distributions of proceeds. Free file 2011 taxes   The cooperative may distribute the unexpended balance of collections or assessments remaining on hand at the end of the year to members or patrons prorated on the basis of their patronage or business done with the cooperative. Free file 2011 taxes Such distribution represents a refund in the costs of services rendered to the member. Free file 2011 taxes The 85% Requirement All of the organizations listed above must submit evidence with their application that they receive 85% or more of their gross income from their members for the sole purpose of meeting losses and expenses. Free file 2011 taxes Nevertheless, certain items of income are excluded from the computation of the 85% requirement if the organization is a mutual or cooperative telephone or electric company. Free file 2011 taxes Mutual or cooperative telephone company. Free file 2011 taxes   A mutual or cooperative telephone company will exclude from the computation of the 85% requirement any income received or accrued from: A nonmember telephone company for the performance of communication services involving the completion of long distance calls to, from, or between members of the mutual or cooperative telephone company, Qualified pole rentals, The sale of display listings in a directory furnished to its members, or The prepayment of a loan created in 1987, 1988, or 1989, under section 306A, 306B, or 311 of the Rural Electrification Act of 1936. Free file 2011 taxes Mutual or cooperative electric company. Free file 2011 taxes   A mutual or cooperative electric company will exclude from the computation of the 85% requirement any income received or accrued from: Qualified pole rentals, Any provision or sale of electric energy transmission services or ancillary service if the services are provided on a nondiscriminatory open access basis under an open access transmission tariff approved or accepted by the Federal Energy Regulatory Commission (FERC) or under an independent transmission provider agreement approved or accepted by FERC (other than income received or accrued directly or indirectly from a member), The provision or sale of electric energy distribution services or ancillary services if the services are provided on a nondiscriminatory open-access basis to distribute electric energy not owned by the mutual or electric cooperative company: To end-users who are served by distribution facilities not owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), or Generated by a generation facility not owned or leased by the company or any of its members and which is directly connected to distribution facilities owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), Any nuclear decommissioning transaction, or Any asset exchange or conversion transaction. Free file 2011 taxes   An electric cooperative's sale of excess fuel at cost in the year of purchase is not income for purposes of determining compliance with the 85% requirement. Free file 2011 taxes Qualified pole rental. Free file 2011 taxes   The term qualified pole rental means any rental of a pole (or other structure used to support wires) if the pole (or other structure) is used: By the telephone or electric company to support one or more wires that are used by the company in providing telephone or electric services to its members, and Pursuant to the rental to support one or more wires (in addition to wires described in (1)) for use in connection with the transmission by wire of electricity or of telephone or other communications. Free file 2011 taxes   The term rental, for this purpose, includes any sale of the right to use the pole (or other structure). Free file 2011 taxes The 85% requirement is applied on the basis of an annual accounting period. Free file 2011 taxes Failure of an organization to meet the requirement in a particular year precludes exemption for that year, but has no effect upon exemption for years in which the 85% requirement is met. Free file 2011 taxes Gain from the sale or conversion of the organization's property is not considered an amount received from members in determining whether the organization's income consists of amounts collected from members. Free file 2011 taxes Because the 85% income test is based on gross income, capital losses cannot be used to reduce capital gains for purposes of this test. Free file 2011 taxes Example. Free file 2011 taxes   The books of an organization reflect the following for the calendar year. Free file 2011 taxes Collections from members $2,400 Short-term capital gains 600 Short-term capital losses 400 Other income None Gross income ($2,400 + $600 =$3000) 100% Collected from members ($2,400) 80%   Since amounts collected from members do not constitute at least 85% of gross income, the organization is not entitled to exemption from federal income tax for the year. Free file 2011 taxes   Voluntary contributions in the nature of gifts are not taken into account for purposes of the 85% computation. Free file 2011 taxes   Other tax-exempt income besides gifts is considered as income received from other than members in applying the 85% test. Free file 2011 taxes   If the 85% test is not met, your organization, if classifiable under this section, will not qualify for exemption as any other type of organization described in this publication. Free file 2011 taxes Tax treatment of donations. Free file 2011 taxes   Donations to an organization described in this section are not deductible as charitable contributions on the donor's federal income tax return. Free file 2011 taxes Local Life Insurance Associations A benevolent life insurance association or an organization seeking recognition of exemption on grounds of similarity to a benevolent life insurance association must submit evidence upon applying for recognition of exemption that it will be of a purely local character, that its excess funds will be refunded to members or retained in reasonable reserves to meet future losses and expenses, and that it meets the 85% income requirement. Free file 2011 taxes If an organization issues policies for stipulated cash premiums, or if it requires advance deposits to cover the cost of the insurance and maintains investments from which more than 15% of its income is derived, it will not be entitled to exemption. Free file 2011 taxes To establish that your organization is of a purely local character, it should show that its activities will be confined to a particular community, place, or district irrespective of political subdivisions. Free file 2011 taxes If the activities of an organization are limited only by the borders of a state, it cannot be purely local in character. Free file 2011 taxes A benevolent life insurance association that does not terminate membership when a member moves from the local area in which the association operates will qualify for exemption if it meets the other requirements. Free file 2011 taxes A copy of each type of policy issued by your organization should be included with the application for recognition of exemption. Free file 2011 taxes Organizations similar to local benevolent life insurance companies. Free file 2011 taxes   These organizations include those that in addition to paying death benefits also provide for the payment of sick, accident, or health benefits. Free file 2011 taxes However, an organization that pays only sick, accident, or health benefits, but not life insurance benefits, is not an organization similar to a benevolent life insurance association and should not apply for recognition of exemption as described in this section. Free file 2011 taxes Burial and funeral benefit insurance organization. Free file 2011 taxes   This type of organization can apply for recognition of exemption as an organization similar to a benevolent life insurance company if it establishes that the benefits are paid in cash and if it is not engaged directly in the manufacture of funeral supplies or the performance of funeral services. Free file 2011 taxes An organization that provides its benefits in the form of supplies and service is not a life insurance company. Free file 2011 taxes Such an organization can seek recognition of exemption from federal income tax, however, as a mutual insurance company other than life. Free file 2011 taxes Mutual or Cooperative Associations Mutual ditch or irrigation companies, mutual or cooperative telephone companies, and like organizations need not establish that they are of a purely local character. Free file 2011 taxes They can serve noncontiguous areas. Free file 2011 taxes Like organization. Free file 2011 taxes   A like organization is a cooperative or mutual organization that performs a service similar to mutual ditch, irrigation, telephone, or electric companies. Free file 2011 taxes Examples include the following: cooperatives that provide protection of river banks to prevent erosion, water and sewer services, cable television, satellite, television, cellular phone services, two-way radio service, or natural gas services. Free file 2011 taxes 501(c)(13) - Cemetery Companies If your organization wishes to obtain recognition of exemption from federal income tax as a cemetery company or a corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, it must file an application on Form 1024. Free file 2011 taxes For the procedure to follow to file an application, see Application, Approval, and Appeal Procedures in chapter 1. Free file 2011 taxes A nonprofit mutual cemetery company that seeks recognition of exemption should submit evidence with its application that it is owned and operated exclusively for the benefit of its lot owners who hold lots for bona fide burial purposes and not for purposes of resale. Free file 2011 taxes A mutual cemetery company that also engages in charitable activities, such as the burial of paupers, will be regarded as operating within this standard. Free file 2011 taxes The fact that a mutual cemetery company limits its membership to a particular class of individuals, such as members of a family, will not affect its status as mutual so long as all the other requirements of section 501(c)(13) are met. Free file 2011 taxes If your organization is a nonprofit corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, you should show that it is not permitted by its charter to engage in any business not necessarily incident to that purpose. Free file 2011 taxes Operating a mortuary is not permitted. Free file 2011 taxes However, selling monuments, markers, vaults, and flowers solely for use in the cemetery is permitted if the profits from these sales are used to maintain the cemetery as a whole. Free file 2011 taxes How income can be used. Free file 2011 taxes   You should show that your organization's earnings are or will be used only in one or more of the following ways. Free file 2011 taxes To pay the ordinary and necessary expenses of operating, maintaining, and improving the cemetery or crematorium. Free file 2011 taxes To buy cemetery property. Free file 2011 taxes To create a fund that will provide a source of income for the perpetual care of the cemetery or a reasonable reserve for any ordinary or necessary purpose. Free file 2011 taxes No part of the net earnings of your organization can inure to the benefit of any private shareholder or individual. Free file 2011 taxes Ordinary and necessary expenses in connection with the operation, management, maintenance, and improvement of the cemetery are permitted, as are reasonable fees for the services of a manager. Free file 2011 taxes Buying cemetery property. Free file 2011 taxes   Payments can be made to amortize debt incurred to buy land, but cannot be in the nature of profit distributions. Free file 2011 taxes You must show the method used to finance the purchase of the cemetery property and that the purchase price of the land at the time of its sale to the cemetery was not unreasonable. Free file 2011 taxes   Except for holders of preferred stock (discussed later), no person can have any interest in the net earnings of a tax-exempt cemetery company or crematorium. Free file 2011 taxes Therefore, if property is transferred to the organization in exchange for an interest in the organization's net earnings, the organization will not