T.C. M em o . 2 0 2 0 -1 2 9

UNITED STATES TAX COURT

THE KOREAN-AM ERICAN SENIOR M UTUAL ASSOCIATION, INC., Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 1 8 29 -1 7 X. Fi l edSep t em b er 9 , 2 0 2 0
.

Sam u el S. W ei s s m an , fo r p et i t i o n er. Cat h eri n e R. Ch as t an etan dM arkL. Hu l s e, fo r res p o n den t
.

M EM ORANDUM OPINION LEYDEN, Sp eci al Tri al J u d g e: Aft er ex am i n i n g the act iv i t i es o f p et i t i o n er, Th e Ko rean -Am eri can Sen i o r M u tu al As s o ci at i o n , In c. (KASM A), th e In t ern al- 2
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[* 2 ] Rev enu e Serv i ce (IRS) 1 i s s u eda fi n al ad v ers e d et erm i n at i o n l et t er d at ed Sep tem b er 6 , 2 0 1 7 , rev ok in g KASM A’ s t ax -ex em p t s t atu s as o f t hatd at e. Th e IRS d et erm i n edth atKASM A was n oto p erat edex cl u s i v el y fo r o n e o r m o re
ex em p tp u rp o s es as s etfo rt h i n s ect i o n 5 0 1 (c)(3 ). 2 KASM Aex h au s tedi t s ad m i n is trat i v e rem ed i es , s ee s ec. 7 4 2 8 (b )(2 ); Ru l e 2 1 0 (c)(4 ), an d ch al len g edth e IRS’ d et erm i n at i o n b y t i m el y fi l i n g a p et i t i o n wi th th e Co urtfo r a d ecl arat o ry ju d g m en t , s ee s ec. 7 4 2 8 (a), (b )(3 ). Th e s o l e i s su e fo r d et erm i n at i on i s wh et h er KASM A was o p erat edex cl u s i v el y fo r o n e o r m o re ex em

p t p u rp o ses as s etfo rt h i n
s ect i on 5 0 1 (c)(3 ). Th e Co u rtco n cl u d es i twas n o t
. Back gro u n d Th e p art i es fi l edwi th th e Co u rtth e en t i re ad m in i s trat iv e reco rd an d
s ub m i t t edth is cas e fo r d eci s i o n wi th o u ttri al i n acco rd an ce wi th Ru l e 2 1 7(b )(1 )
an d (2 ). See al s o Ru l e 1 2 2 . Fo r p urp o s es o f th is p ro ceed i n g , th e fact s an d

1 Th e Co urt u s es th e t erm

“ IRS” t o refer t o ad m i ni s trat i ve act i on s t ak en o u t s i d e o f t h es e p ro ceed in g s . Th e Co u rtu s es th e t erm “ res p o n d en t ” t o refer t o th e Co m m i s s i o n er o f In t ern al Rev en u e, wh o i s t h e h eado f t h e IRS an di s res p on d en t i n thi s cas e, an d t o refer t o act io n s t ak en i n co n n ect io n wi th th i s cas e.

2 Un l es s o th erwi s e i nd i cat ed , al l s ect i o n referen ces are t o th e In t ern al Rev enu e Co de, as am en d ed , i n effect atal l rel ev an tt i m es , an dal l Ru l e referen ces are t o the Tax Co urtRu l es o f Pract i ce an dPro cedure.- 3
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[* 3 ] rep res en t at i o ns co n t ai n edi n th e ad m i n i s trat i v e reco rdare accep tedas tru e,
s ee Ru l e 2 1 7 (b )(1 ), an d are i n co rp o rat ed h erei n b y th i s referen ce. 3 KASM A i s a New Yo rkn o np ro fi to rg an i zat io n wi th i t s p ri n ci p al p l ace o f b u s i n es s i n New Yo rk , New Yo rk , wh en i t s p et it io n was fi ledwi th th e Co u rt
. I. KASM A’ s Org an i zat i o n KASM A was o rg an i zedas a n o npro fi t co rp o rat i on u n d er th e l aws o f New Yo rko n M ay

2 8 , 1 99 6 . Acco rd i n g t o KASM A’ s cert ifi cat e o f i n co rp o rat i o n , s i gn edo n M ay

2 2 , 1 9 9 6 , an dam en d edo n M ay 1 8 , 1 9 9 8 , KASM A “ i s o rg an i zed
ex cl u s i v el y

fo r ch ari t ab le an d edu cat i o n al p u rp o s es , as s p eci fi edi n Sect i o n 5 0 1 (c)(3 ) o f t h e In t ern al Rev en u e Co d e o f 1 9 86 ” an dfo rm edfo r th e fo l l o w i n g fo u r p u rp o s es : a) To p ro v i de b uri al b en efi t s an das s is t an ce t o t h e s u rv i vi n g fam i l i es o f d eceas ed ; b ) To p ro v id e i n fo rm at i o n t o s en i o r ci t i zen s i n reg ardt o th ei r b u ri al co n cern s an dg en eral wel fare;

3 Res p o n d en ti n h i s o p en i n g b ri ef s tat es th atth e IRS rev o k ed KASM A’ s t ax ex em p ts t atu s b ecau s e i twas n ei t h er o rg an i zedn o r o p erat ed ex cl us i v el y fo r o n e o r m o re ex em

p tp u rp o s es . Ho w ev er, t he fi n al ad vers e d et erm i n at io n l et t er s tat es th e reas on fo r rev ok i n g KASM A’ s t ax -ex em p ts t atus i s th atKASM A was n o to p erat ed ex cl u s i v el y

fo r o n e o r m o re ex em

p tp urp o s es as s etfo rt h i n s ec. 5 0 1 (c)(3 ). Th erefo re, t h e Co u rtd o es n o t ad dres s res p on d en t ’ s arg u m en tthatKASM A was n o to rg an i zedex cl u s i v el y fo r o n e o r m o re ex em p t p urp o s es .- 4
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[* 4 ] c) To p ro v i de o rg an i zedact i v i t ies fo r s en i o r ci t i zen s t o en h an ce t h ei r effect i v e u s e o f free t i m e an dfri en d sh i p ; an d d ) To p ro v id e an n u al s ch o l ars h i p s t o n eed y , p ro m i s i n g s tu d en t s . II. KASM A’ s Ap p l i cat i o n fo r Reco g n i t i o n o f Tax -Ex em p tSt atu s OnFeb ru ary 1 8 , 1 9 9 8, KASM As ub m i tt edt o t h e IRS a Fo rm 1 0 2 3 , Ap p l i cat i o n fo r Reco g ni t i o n o f Ex em pt i o n Un d er Sect i o n 5 0 1 (c)(3 ) o f t he In t ern al Rev enu e Co de. On th e Fo rm 1 0 2 3 KASM Ai n d i cat edth at : (1 ) KASM A i s o rg an i zedas a m em bers h i p o rg an i zat i o n o p ent o s en i o rs ag es 5 5 t o 9 0 res i d i n g i n the New Yo rkm et ro p o li t an area wh o p ay i t s m em b ers h i p du es
an d s up p o rtKASM A’ s p u rp os es ; an d (2 ) To b eco m e a m em

b er a s en i o r m

u s ts ubm i t an ap p l icat i o n fo r
m em b ers h i p an dp ay

th e fo l l owi n g m em

b ers hi p dues : a $ 1 0 0 ap p li cat i o n fee fo r
s en i o rs ag es 5 5 t o 7 0 o r a $ 15 0 ap p l i cat i o n fee fo r s en i o rs ag es 7 1 t o 9 0 ; a $ 3 0
an n ual fee; an d a $ 1 0 fee ev ery t i m e a m em

ber d ies
. KASM A’ s b o ard o f d i rect o rs co u l drejectan ap p li cat i o n fo r m em b ers h i p fo r
cau s e an d co u ld t erm i n at e a m em b ers h i p i f a m em

b er fai l edt o p ay

th e req u i red
m em b ers h i p du es fo r 9 0 d ay s aft er recei v in g a wri tt en n o t i ce req u es t i n g p aym en t
. KASM A l i s t edth ree m ajo r p l an nedact i v i t i es : b u ri al b en efi t s , s erv i ces fo r
s en i o rs , an d s ch o lars h i p s fo r s tu d en t s .- 5
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[* 5 ] A. Bu ri al Ben efi t s KASM A m em

b ers recei vedth e fo l l o wi n g “ b en efi t s ” i n ex ch an g e fo r t h ei r p aym en t o f du es : (1 ) KASM A p ai da b u ri al b en efi tt o th e s u rv i v i n g fam i l y an d
en co urag edo th er m em

b ers t o at t en dthe fu n eral s erv i ces an d(2 ) m em b ers recei v ed a d i s co u n to n fu n eral ex p en s es an d recei v edi n fo rm at i o n o n b u ri al p l o t s an d fu n eral arran gem en t s . KASM A d es cri b ed i t s b u ri al b en efi t s act iv i ty as fo l lo ws : 1 ) Pro v i d i n g Bu ri al g ran t s & as s i s tan ces - Th i s p ro g ram

i s i n t en d edt o l i ftfi n an ci al b u rd en s o ff th e b acko f t he s u rv i v i n g fam il i es o f d eced en tm em b ers b y p ro v i d in g a l u m

p -s u m g ran tfo r t h e b u ri al ex p en s es . If n o s u rv i vi ng fam i l i es , th e o rg an izat i o n wi l l t ak e care o f th e fu n eral s erv i ce. - Th e o rg an i zat i o n’ s o ffi cers carryo u t th e p ro g ram fo r p eo p l e i n t h e m et ro p ol i tan NY area. KASM A i n d icat ed th atth e b u ri al b en efi t s were l i m i t edt o “ [m ] em bers an d
m em b ers ’ s u rv i v i ng fam i l i es ” b u tn o t edth at“ ex cep t i o ns wi l l b e m ad e fo r t h o s e
n eed y , p o o r s en io rs ”. B. Serv i ces fo r Sen i ors KASM A d es cri b ed i t s s erv i ces fo r s en io rs as fo l lo ws : 2 ) Serv i ces fo r Sen io rs - Pro v i d es * * * o n -g o i ng i n fo rm at i o n reg ard i n g b u ri al s erv i ces , s i t es , co s t s , et c.- 6
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[* 6 ] - Pro v i d es referal [s i c] s erv ices t o s en i o rs wh o n eed s [s i c]

v ari o u s as s i s t an ce fro m

g o v ern m en tag en ci es . Hel p i s p ro v i d ed o ver t el ep h on e o r ato ffi ce. - Org an i ze cu l tu ral an drecreat i o n al act i v es [s i c] fo r s en i o rs . On e cu l tu ral p ro g ram

was h el d fo r p o o r s en i o rs ata Ko rean Res t au ran ti n Fl us h i n g o n 1 / 2 3/ 9 7
. C. Sch o l ars h i p s fo r Stu d en t s KASM A s t at edth ati two u l dp ro v i d e s ch o l ars hi p award s fo r n eed y s tu d en t s wh en KASM A “ accu m

u l at es th e n eces s ary

fu n d[s ] fo r th e award s .” OnSch edul e H, Org an i zat i o n s Pro v id i n g Sch o l ars hi p Ben efi t s, Stu d en tAi d, Et c., t o In d i v i du al s , o f t h e Fo rm

1 0 2 3 , KASM A rep ort ed : [Th e] [s ] ch o l ars hi p awardp l an i s s t i l l i n th e p ro ces s o f b ei n g d ev el o p edwi th th e fo l l o wi n g g u id el i n es : 1 ) $ 1 ,0 0 0 an n u al s ch o lars h ip wi ll b e g i v en t o s el ect eds tu d en t s as a g i ftat * * * KASM A ’ s an n u al m eet i n g ; 2 ) A s ch o l ars h i p co m

m i tt ee o f fi v e wi l l m ak e th e s el ect i o ns ; & 3 ) Ap p l i cat i on [s ] fo r t he award wi l l b e s o l ici t edb y p ub l i c n o t i ce i n ad v an ce. III. IRS Reco g n i ti on o f KASM Aas Tax Ex em p t By l et t er d at ed Ap ri l 2 7 , 1 9 9 8 , Ph i l ip A. M i l l et , IRS ex em p to rg an i zat i o n
s p eci al i s t , n o ti fi edKASM A th atth e IRS was rev i ewi n g t h e Fo rm 1 02 3 an d req u es t edad d i ti o n al i n fo rm at i o n t o s up p o rti t s req u es tt o b e reco g n i zedas a t ax ex em p to rg an i zat i o n.- 7
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[* 7 ] Sp eci fi cal l y , M r. M i l l et req u es t edth atKASM A p ro vi d e a d et ai l ed d es cri p t io n o f i t s p as t, p res en t , an dp ro p o s edact i v i t i es as wel l as th e p ercen t ag e o f t i m e an dfu n d s d ev ot edt o th o s e act i v it i es . He al s o req u es t edth at KASM A am en d i t s art i cl es o f i n co rp o rat io n t o s t at e t h atth e p urp o s e o f t h e co rp o rat i o n i s t o p ro v id e b u ri al b en efi t s an das s i s t an ce t o th e s u rv i v i ng fam il i es o f d eceas ed

“ s en i o rs ”. M r. M il leti n di cat edth at th e i ni t i al l an gu ag e i n th e art i cl es o f i n co rp o rat io n d i dn otm eetth e req u i rem en t s o f s ect i o n 5 0 1 (c)(3 ) b ecau se i td i dn o t l i m i t KASM A’ s p u rp o s es t o th o s e s p eci fi edi n s ect i o n 5 0 1 (c)(3 ) an di n fo rm ed KASM A th ati f i ts p urp os es d i dn o tl i m i tb u ri al b en efi t s an das s is t an ce t o th e
s u rv i v i n g fam i l i es o f d eceas eds en io rs , th e o rg an i zat i o n’ s ch ari t ab l e p u rp o s e
wo u l dn o tb e t o b en efi t th e ag edan d/ o r un d erp ri v i l eg ed
. KASM A res p o n d edt o M r. M i l l et ’ s req u es t b y l et t er d at edJ u n e 2 4 , 1 9 9 8 , an d d es cri b edi t s act iv i t i es as fo l l o ws : I. Des cri pt i o n o f Act i v i t i es (1 ) Pro v i d i n g l u m

p -s u m b u ri al g ran t s an das s i s tan ce t o th e s u rv i v i n g fam i l y m em

b ers o f t h e d eceas eds en i ors . (a) Bu ri al g ran ti s g i ven t o th e s urv i v in g fam i l y rel at iv e[s ] o f t h e d eceas ed s en i o rs , 5 5 -9 0 y ears , wh o res i d e i n th e NY m et ro p o l i t an area an dwh o are m em b ers o f * * * [KASM A ] . If th ere i s n o s u rv iv i n g fam i l y m em b ers , th en * * * [KASM A ] wi l l arran g e t h e b u ri al cerem on y fo r t h e d eceas ed [.] M em b ers m u s tfi l l o u tan ap p l i cat i o n fo rm an dp ay m em b ers h ip du es . Each m em b er al s o p ay s $ 30 t o ward th e b u ri al as s i s t an ce- 8
- wh en ev er a m em

b er p as s es away . As o f t he ap p li cat i o n d at e, 1 3 b u ri al g ran t s ($ 1 ,4 00 -3 ,0 0 0 ) were m ad e t o t h e s u rv i v i n g fam i l y

m em b ers t o as s i s twi th th e b u ri al ex p en s es . (b ) % o f t i m e d ev o t ed t o th i s act i v i ty .....7 0 % (c) % o f fu n d s d ev o t edt o th is act iv it y .....6 0 % In th e fu tu re, as res erv e fu n ds i n creas e, * * * [KASM A] p l an s t o ex p an di t[s i c] co v erag e o f b en efi t s t o th os e n o n -m em b er s en i ors wh o hav e n o s u rv i v i n g fam i ly m em b ers . In fo rm at i o n wi l l b e m ad e av ai l ab l e t o th e co m m u n it y th ro ug h n ews m ed i a. (2 ) Serv i ces fo r Sen i ors (a) Th is s erv i ce i s p ro v i d edt o m em bers an dn o n m em b ers * * * al i k e. Serv i ces o ft en p ro v i d edare i n fo rm at i o n co n cern i n g b u ri al s i t es , co s t s an dfu n eral h om es ; SSI, m ed i cai d , fo o d s t am p [s i c] ; an drecreat i o n al act i v i t i es fo r t h e s en i o rs s u ch as free d i n ner[s ] an d cu l tu ral s h o ws , s h o rt tri p s t o co u n try s i d e s ig h t -s eei n g . (b ) % o f t i m e d ev o t ed t o th i s act i v i ty .....2 5 % (c) % o f fu n d s d ev o t edt o th is act iv it y .....2 5 % In [t h e] fu tu re, * * * [KASM A ] p l an [s ] t o h i re a fu l l -t i m e s t aff wh o wi l l co o rd i n at e th i s s erv i ce. (3 ) Sch o l ars h i p Awardt o Need y Stu d en t s (a) $ 1 , 0 0 0 s ch o l ars h i p wi l l b e g i v eno u t t o s el ect ed s tu d en ts i n th e New Yo rkM et ro po l i t an area wh o are at t en d i n g Co l l eg e o r Gradu at e Sch o o l wh o n eedfi n an ci al ai d
. (See Sch edul e H [Fo rm 1 0 2 3 ] ) Av ai l ab i l i ty

o f s ch o l ars h i p wi l l b e an n o u nced i n th e n ew[s ] m ed i a. (b ) % o f t i m e d ev o t ed t o th i s act i v i ty .....5 % (c) % o f fu n d s d ev o t edt o th is act iv it y .....5 % In th e fu tu re, as res erv e fu n ds i n creas e, * * * [KASM A] p l an s t o al l o cat e m o re m o n ey

fo r s ch o l ars h i ps . In th e l et t er KASM As t at edth at i th ad“ n o fo rm al co n tract s wi th fu neral h o m es ” ex cep t“ a v erb al u n d ers t an d in g wi th a fu n eral h om e t h ati t wi l l * * * [g i v e] [* 8 ]- 9
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[* 9 ] ab o ut1 0 % d is co u n ti n th e b u ri al ex p en ses i f t h e d eceas eds en i o r was a
m em b er o f * * * [KASM A] .” KASM A n o t edth at i t s “ o ffi cers an dd i rect o rs are
n o td i rect l y

rel at edt o th e fu n eral h o m e i n qu es t i o n .” KASM A al s o co m

p l i edwi th M r. M i l l et ’ s req u es tan ds ub m i tt ed an am en d ed cert ifi cat e o f i nco rp o rat i o n wh ich i n p ert i n en tp arts t at edth atKASM A i s fo rm ed

“ [t ] o p ro v i d e b u ri al b en efi t s an das s i s t an ce t o th e s u rv i v in g fam i l i es o f d eceas ed
s en i o rs ”. KASM A’ s at t orn ey

s en tan o th er l et ter t o M r. M i l l et d at edJ u l y 2 9 , 1 9 9 8 , wh i ch s t at edth e fo l l owi ng : 1 ) In th e fu tu re, as res erv e fu n ds i n creas e * * * [KASM A] wi l l ex p an d * * * [i t s ] co v erag e o f b u ri al as s i s t an ce t o th o s e n o n -m em ber s en i ors o v er 6 0 y ears wh o h av e n o s u rv i v i ng fam i l y m em b ers , an d wh o l eftl i t t l e m o n ey

t o co v er h i s /h er b u ri al ex p en ses . * * * [KASM A ] wi l l p ro vi d e t h e n eces s ary b u ri al cerem o n y

an d b u ri al arran g em en t s fo r s u ch p ers o n s . 2 ) If en o u g h * * * [fu n d s are] av ai l ab le i n th e fu ture, * * * [KASM A] wi l l al s o ex p an d* * * [i t s ] b u ri al as s is t an ce t o th o s e n o n-m em ber s en i ors o v er 6 0 y ears wh o l efts u rv i v i ng fam i l y m em bers b u twh o are t o o p o o r t o p ay

fo r t h e b u ri al ex p en s es . * * * * * * * 5 ) If * * * [KASM A’ s ] res erv e fu n d s i n creas e, * * * [i t ] wi l l al s o ex p an d * * * [i t s ] award s o f s ch o l ars h i p s fo r co ll eg e s tu d en t s wh o are i n n eedo f fi n an ci al as s i s t an ce.- 1 0 -

[* 1 0 ] Aft er a t el ep h o n e co n v ers at i o n wi th M r. M i l l et , KASM A’ s rep res en t at i v e
s en ta l et t er d at ed J ul y

3 1 , 1 9 9 8 , i n d i cat i n g th atKASM Aag reedt o ch an ge i t s
o p erat i n g p ro cedu res s o t h atal l p aym en t s fo r t he fu n eral ex p en ses o f i t s d eceas ed
m em b ers an dn o n m em

b ers al i k e wo u l db e p ai dd i rect l y t o the fu n eral h o m es o r
o th er s erv i ce p ro vi ders
. OnAu gu s t1 0 , 1 9 9 8, the IRS i s s u eda d et erm i n at i o n l et t er s t at i n g th ato n th e b as i s o f t h e i n fo rm at i o n s up p l i edan das s u m in g i t s o p erat i on s wo u l d b e as s t at edi n th e ap p l i cat i o n fo r reco g n i t io n o f ex em p t i o n , th e IRS d et erm i nedKASM A was
ex em p tfro m Fed eral i n co m e t ax u n d er s ect i on 5 0 1 (a) as an o rg an i zat i o n d es cri b ed i n s ect io n 5 0 1 (c)(3 ). IV. IRS Fi n al Det erm i n at i o n Let t er Dat edFeb ru ary 1 9 , 2 0 0 4 KASM A recei veda fi n al d et erm i n at i o n l et t er reg ard i n g i ts p ri v at e fo u n dat i o n cl as s i fi cat i on o n Feb ru ary 1 9 , 2 0 0 4 . Th e IRS p rev i o u s l y h ad d et erm i n edth atKASM A was an o rg an i zat i o n d es cri b edi n s ect i o n 5 0 9 (a)(2 ). Ho wev er, i n th e fi n al d et erm i n at i o n l et t er t h e IRS m o d i fi edKASM A’ s fo u n d at i o n
s t atu s t o th ato f a p ub l i c ch ari ty d es cri b edi n s ect i o n s 5 09 (a)(1 ) an d 1 7 0 (b )(1 )(A)(v i ), effect i v e fo r y ears b eg i n n i n g M ay 1 , 2 00 1
. Th e l et t er al s o s t at ed th atKASM A’ s t ax -ex em p ts t atu s u n d er s ect i o n 5 01 (c)(3 ) was n o taffect ed
.- 1 1 -

[* 1 1 ] V. IRS Ex am i n at io n o f KASM A KASM A fi l edi t s an n u al retu rn , Fo rm 9 9 0 , Retu rn o f Org an i zat i on Ex em p t Fro m In co m e Tax , d at edSep t em b er 6 , 2 0 1 3 , fo r i t s t ax ab l e y ear s t art i n g o n M ay 1 , 2 0 1 2 , an den d i n g o n Ap ri l 3 0 , 2 0 1 3 (TYE Ap ri l 3 0 , 2 01 3 ). Onth e Fo rm 9 9 0 KASM A rep o rt edt o t al rev en u e fo r TYE Ap ri l 3 0 , 2 0 1 3 , o f $ 2 ,1 3 5 ,7 7 4 co n s i s t i n g
o f “ m em bers hi p du es ” o f $ 2 0 3 ,7 4 0 an du n ex pl ai n ed “ o th er co n tri b u t i o n s, g i ft s , g ran t s , an ds i m i lar am o u n t s ” o f $ 1 ,9 3 2 ,0 3 4 . KASM A al s o rep o rt edt o t al ex p en s es
o f $ 2 , 0 8 3 ,5 0 7 , o f wh i ch $ 1 , 9 9 0 ,5 7 4 rel at edt o p ro v i d i ng b u ri al b en efi t s. Fo r TYE Ap ri l 3 0 , 2 0 13 , KASM A d i dn o trep o rtan y rev enu e fro m

fu nd rai s i n g . KASM A al s o rep o rt edth ati t(1 ) p ro vi d edb u ri al b en efi ts t o 1 4 0 fam i l i es duri n g TYE Ap ri l 3 0 , 2 0 1 3 , an d (2 ) h ad$ 5 3 6 ,0 14 i n cas h an d$ 1 79 ,6 6 0 o f n et acco u n t s recei v ab l e. KASM A p urch as eda n ew o ffi ce co n d o m i n i u m i n Fl u s h i n g , New Yo rk , o n Feb ru ary 2 4 , 2 0 0 8 , an d p ai d t h e fu l l p ri ce wi th ou ta m o rt g ag e. Oni t s Fo rm 9 9 0 KASM A l i s t edth e b o o kv al u e o f t h i s co n d om i n i u m as $ 8 1 7,3 6 2
. By l et t er d at ed No v em

b er 3 , 2 0 1 4 , th e IRS i n fo rm edKASM A th ati th ad b een sel ect edfo r an ex am i n at i o n o f i t s Fo rm 9 9 0 fo r TYE Ap ri l 3 0 , 2 0 1 3. In that l et t er t he IRS req u es t edth atKASM A s ub m i tcert ai n d o cu m en ts s o th atth e IRS
co u ld : (1 ) as cert ai n wh ether i ts t i ll m etth e o rg an i zat i o n al t es t , (2 ) v eri fy th ati t s- 1 2 -

[* 1 2 ] act i v i t i es were ex em p t act i v i t i es , an d(3 ) d et erm i n e t h ati th adp ro p erl y
co m p l et edth e Fo rm

9 9 0 fo r TYE Ap ri l 3 0 , 2 0 1 3. VI. KASM A’ s Op erat i o n s Du ri n g TYE Ap ri l 3 0 , 2 0 1 3 Du ri n g TYE Ap ri l 30 , 2 0 1 3 , KASM A o p erat edas a m em b ers h ip
o rg an i zat i o n o p en t o an y on e wh o was 5 5 t o 9 0 y ears o ldres i d i n g i n t h e New Yo rk Ci ty m et ro po l i t an area, 4 an dch arg ed a $ 1 5 0 m em b ers h i p ap p l i cat i on fee 5 t o
an y o n e 5 5 y ears o r o l d er wh o ap p l i edt o jo i n th e o rg an i zat i o n . Up o n th e d eat h o f
a m em b er al l rem ai n i n g m em

b ers were ch arg ed$ 1 0
. 6 Wh en a m em

b er d i ed , KASM A p ai da cert ai n am o u ntt o the fu n eral h o m e t o ward s t h e m em

b er’ s fu neral ex p en s es . Th e am ou n tp ai dt o th e fu neral h om e was d et erm i n edo n t h e b as i s o f t h e l en g th o f t i m e t h e d eceas edi n d i v i du al was a
m em b er o f KASM A. KASM A p ai da s ep arat e am o u ntd i rect l y t o the fam i l y

o f t h e

4 Des p i t e i t s n am e, Th e Ko rean -Am eri can Sen i or M u tu al As s o ci at i o n , th ere i s n o tan yth i n g i n the reco rdth ati n d i cat es th atm em b ers h i p was l i m i t edt o Ko rean Am eri can s en i o rs .

5 Th e m em

b ers h i p ap p l i cat i o n fee co l l ect eddu ri n g TYE Ap ri l 3 0 , 2 0 1 3 , was d i fferen t th an wh at KASM A rep o rt edo n t h e Fo rm 1 0 2 3
. Onth at fo rm

KASM A s t at edth atth e m em

b ers hi p ap p l i cat i o n fee v ari edd ep en d i n g o n th e ag e o f th e p ers o n ap p l y in g fo r m em b ers h i p --ran gi n g $ 1 0 0 t o $ 1 5 0.
6 In i t s p ro t es tl et t er d at edNo v em b er 2 7 , 2 0 1 5 , KASM A s t at edth ati t as s es s edeach m em

b er o th er fees ev ery three m o n th s fo r t h e fu n eral co s t s i n cu rred i n the p rev io u s th ree m o n th s an dth atatth att i m e each m em b er was as s es s ed ap p ro x i m at el y $ 3 0 0 t o $ 3 5 0 p er y ear.- 1 3 -

[* 1 3 ] d eceas edi n d i v i du al acco rd i n g t o a Ko rean trad i t i o n. Acco rd i ng t o thi s trad i ti o n p eo p l e wh o at t en da fu n eral d o nat e m o n ey t o th e b ereav edfam i l y

i n an
en v el o p e. Fo r ex am

p le, KASM A p ai d$ 1 1 , 0 00 t o the fu n eral h o m e fo r t h e fu n eral b i l l an d $ 3 ,2 1 0 t o th e d eceas ed ’ s fam i l y i n acco rd an ce wi th t h e Ko rean trad i t i o n
up o n the d eat h o f a m em

b er wh o h adb een a m em ber o f KASM A fo r m o re t h an fo u r y ears . KASM A d id n o trep o rto n th e Fo rm 9 9 0 fo r TYE Ap ri l 3 0 , 2 0 1 3, an y act i vi t i es wi th res p ectt o i t s s erv i ces fo r s en i o rs o r i t s s ch o l ars h i p award s t o n eed y
s tud en t s . Ho wev er, o n i t s cal en d ar y ear an n u al rep o rtfo r 2 0 13 KASM A i n d i cat ed th atdu ri n g Sep t em

b er th ro u g h Decem

b er 2 0 1 3 i th adp ro vi d ed free l eg al
co n su l t i n g fo r 2 0 p ers o n s , “ So ci al W o rk s erv ice” fo r 5 5 p ers o n s , v o t er reg i s trat i o n
as s i s tan ce fo r 1 7 p ers o n s , an d“ Ho m e Co u nt ry v i s i t i ng p ro g ram ” fo r 1 2 p ers o n s . VII. Th e IRS’ Fi n al Adv ers e Det erm i n at i o n OnNo vem

b er 4 , 2 0 1 5 , th e IRS s en t a l et t er t o KASM Ap ro p o s i n g t o rev o k e i t s t ax -ex em

p ts t atu s u n d er s ect i o n 5 0 1 (c)(3 ) b ecau se KASM Awas n o to p erat ed
ex cl u s i v el y

fo r o n e o r m o re t ax -ex em p tp u rp o s es . KASM A s ubm i t teda wri t t en p ro t es tt o th e IRS Ap p eal s Offi ce d i s p u ti n g th e p ro p o sedrev o cat i o n o f i t s t ax ex em p ts t atu s .- 1 4 -

[* 1 4 ] Th e IRS Ap peal s Offi ce i s su eda fi n al ad v ers e d et erm i n at i o n d at ed Sep tem b er 6 , 2 0 1 7 , an d d et erm i n edth atKASM Ad o es n otqu al i fy as ex em p tfro m Fed eral i nco m e t ax u n d er s ect io n 5 0 1 (c)(3 ) b ecau s e “ [t ] h e p ri m ary act i v i ty o f

* * * [KASM A ] i s th e p ro v i s i o n o f fu n d s t o d efrayo r p ay fo r t h e fu n eral co s t s o f i t s m em b ers ”, wh i ch i s n o t an ex em p tact i v i ty ; th erefo re, KASM A i s “ n o to p erat ed
ex cl u s i v el y

fo r o n e o r m o re ex em

p tp urp o s es ” u nd er s ect i o n 5 0 1 (c)(3 ). Th e IRS g ran t edKASM A’ s req u es tfo r rel i ef p u rs u an tt o s ect io n 7 80 5 (b ) an drev o k edi t s t ax -ex em p ts t atu s p ro s p ect i v el y

b eg i n n i n g o n Sep t em

ber 6 , 2 0 1 7
. Di s cu ss i o n Sect io n 7 4 2 8 (a)(1 )(A) co n fers juri sd i ct i o n o n th e Co u rtt o m ak e a d ecl arat io n i n a cas e o f actu al co n tro v ers y i n v o l v i n g a d et erm i n at i o n b y th e Secret ary wi th res p ectt o th e i n i t i al qu al i fi cat i o n o r co n t i n ui n g qu al i fi cat i o n o f an
o rg an i zat i o n as an o rg an i zat i o n d es cri b edi n s ect i o n 5 0 1 (c)(3 ) wh i ch i s ex em p t fro m t ax u n d er s ect io n 5 0 1 (a). Th e fl u s h t ex t o f s ect i o n 7 4 2 8 (a) p ro v i d es i n p ert i nen tp artth at“ a d et erm i n at i o n wi th res p ectt o a co n t i nu i n g qu al ifi cat i o n * * * i n cl u d es an y

rev o cat i o n o f o r o th er ch an g e i n a qual i fi cat i o n ”. Pet i t i o ner b ears th e b u rd en o f es t ab l i s h i n g th atres p o n d en t ’ s d et erm i n at i o n i s erro neo u s . See Ru l e 1 4 2 (a); Part n ers i n Ch ari ty , In c. v . Co m m i s s i o ner, 1 4 1 T.C. 1 5 1 , 1 6 2 (2 0 1 3). Th e p art i es s ub m i t t edth is cas e wi th ou ta t ri al u nd er Ru le 1 2 2 ,- 1 5 -

[* 1 5 ] an d t h u s th e ev i d en ti ary reco rdco n si st s s o l el y

o f t h e ad m i n i st rat i v e reco rd
. See Ru l e 2 1 7 (b )(2 ). Sect io n 5 0 1 (a) g en eral l y

ex em p t s fro m t ax at i o n an o rg an i zat i o n d es cri b edi n
s ub s ect i o n (c). Sect i o n 5 0 1 (c)(3 ) d es cri bes a qu al i fy i n g o rg an izat i o n i n rel ev an t p artt o i ncl u d e “ [c] o rp o rat i o n s * * * o rg an i zedan do p erat edex cl u s i v el y fo r rel i g io u s, ch ari t ab l e, [ 7 ] sci en t i fi c, t es t i n g fo r p ub li c s afet y , l i t erary , o r edu cat i o n al p u rp os es ”. Ano rg an i zat i on th atqu al i fi es u n d er s ect i o n 5 0 1(c)(3 ) n o to n l y i s
ex em p tfro m Fed eral i n co m e t ax b u tal s o m ay s o l i ci tan daccep td o n at i o ns wh i ch
are n o rm al ly

d edu ct i bl e b y

th e d o n o r ag ai n s th i s o r h er Fed eral t ax . See s ec. 1 7 0 (a), (c)(2 ). Th e IRS d et erm in edth atKASM A d idn o to p erat e ex cl u s i v el y fo r ex em p t p u rp os es (o p erat i on al t es t). Res p o n d en tm ai n t ai n s t hat“ [t ] h e p ri m ary act i vi ty o f

* * * [KASM A ] i s th e p ro v i s i o n o f fu n d s t o d efrayo r p ay fo r t h e fu n eral co s t s o f i t s m em b ers .” Th e s t an d ardfo r t ax -ex em p ts t atu s p res cri bedi n s ect i o n 5 0 1(c)(3 ) requ i res th atan o rg an i zat i o n b e “ o p erat edex cl u si v el y ” fo r an ex em p tp u rp o s e. Sect i o n 1 .5 01 (c)(3 )-1 (c)(1 ), In co m e Tax Reg s ., d es cri b es th e o perat i o nal t es t as fo l l o ws :

7 In ap p l y i n g s ec. 5 0 1 (c)(3 ), th e t erm “ ch ari t ab l e” i s u s edi n i t s g en eral l y accep t edl eg al s en s e an di s n o t l i m i t edb y th e en u m erat edl i s ti n t h ats ect i o n . Sec. 1 .5 01 (c)(3 )-1 (d )(2 ), In co m e Tax Reg s .- 1 6 -

[* 1 6 ] (c) Op erat i o n al t es t --(1 ) Pri m ary act i v i ti es . --An o rg an i zat i on wi l l b e reg ard edas o p erat edex cl u s i v el y fo r o n e o r m o re ex em

p tp u rp o s es o n l y i f i t en g ag es p ri m ari l y

i n act i v i t i es wh i ch acco m p l i s h o ne o r m o re o f s u ch ex em

p tp u rp o s es s p eci fi edi n s ect i on 5 0 1 (c)(3 ). An o rg an i zat i o n wi l l n otb e s o reg ard edi f m ore t h an an i n s ub s tan t i al p art o f i t s act i v i t i es i s n o ti n fu rt h eran ce o f anex em p tp u rp os e. In th i s reg ardth e p res en ce o f a s i n g l e s ub st an t i al p u rp os e t h ati s n o t d es cri b edi n
s ect i on 5 0 1 (c)(3 ) p recl u d es ex em pt i on fro m

t ax u nd er s ect i on 5 0 1 (a) reg ard l es s o f th e n u m b er o r t h e i m

p o rt an ce o f t h e p u rp o s es th atare p res en tan d d es cri b edi n
s ect i on 5 0 1 (c)(3 ). See Bet t er Bu s . Bu reau v . Un i t edSt at es , 3 2 6 U.S. 2 7 9 , 2 8 3 (1 9 4 5).

“ Un d er t h e o p erat i o n al t es t , th e p u rp o s e t o w ard s wh i ch an o rg an i zat i o n ’ s act i vi t i es are d i rect ed , an dn o t th e n atu re o f t h e act i v i t i es th em sel v es , i s u l t i m at el y d i s p o s i t i ve o f t h e o rg an izat i o n ’ s ri g h tt o b e cl as s i fi edas a s ect i on 5 0 1 (c)(3 )
o rg an i zat i o n ex em

p tfro m t ax un d er s ect i o n 5 0 1 (a).” B.S.W . Grp ., In c. v . Co m m i s s i o n er, 7 0 T.C. 3 52 , 3 5 6 -3 5 7 (1 9 7 8 ). As th e Co u rt n o t edi n Part n ers i n Ch ari ty , In c. v . Co m

m i s si o n er, 1 4 1 T.C. at1 6 4 : “ Ev en i n a co m m erci al , p ro fi t m o ti v at edco n t ex t , s u ch act i v i t i es m ay b e wh o l es om e an d co m

m en d ab l e; b u tth ey wi l l n o ts up p ort t ax -ex em p t s t atu s u n l es s th ey

are u n d ert ak ent o fu rt h er an ex em p t p u rp os e.”- 1 7 -

[* 1 7 ] I. KASM A M ak es Two Arg u m en t s . KASM A arg u es thatres p o n den terred i n rev o k i n g i t s t ax -ex em p ts t atu s b ecau s e i ts erv es a p ub l i c i nt eres tan di t s act i v i t i es acco m p l is h o n e o r m o re o f t h e
ex em p tp u rp o s es s p eci fi edi n s ect i o n 5 0 1(c)(3 ). Al t ern at i v el y , KASM A arg u es th atres p o n d en t i s equi t ab l y es t o p p edfro m

rev o ki ng i t s t ax -ex em

pts t atu s b ecau s e
s u ch rev ocat i o n wo u l d b e ag ai n s t th e p ri n ci p l es o f eq u i ty juri s p ru d en ce. Fo r reas o n s m o re fu ll y

d i s cu s s edb el ow t h e Co u rt co n cl u d es th at (1 ) KASM Ah as n o tp ro v en th atres po n d en terred i n d et erm in i ng th at i t was n o t
o p erat edex cl u s i v el y fo r an ex em p tp u rp o se an d(2 ) res p o n d en ti s n o tequ i t ab l y
es t o p p edfro m

rev o k in g KASM A’ s t ax -ex em p ts t atus . II. KASM A Is No tOp erat edEx cl u si vel y fo r an Ex em

pt Pu rp o s e. As p arto f t h e ap p l i cat io n p ro ces s , KASM A rep res en t ed th ati t s p ro p o s ed act i vi t i es were t o p ro v i d e (1 ) b u ri al b en efi t s fo r d eceas edm em b ers , wh ich wo u l d b e p ai dd i rect ly

t o th e fu n eral h o m e; (2 ) s erv i ces fo r s en i o rs , co n s i s t i n g o f referral
s erv i ces , d is tri b ut i n g b u ri al i n fo rm at io n , an do rg an i zi n g cu l tu ral an drecreat i o n al act i vi t i es ; an d(3 ) s ch o l ars h i p award s fo r n eed y s tu den t s . KASM A al s o rep res en t edth ati tp l an n edt o ex p an di t s b u ri al b en efi t s t o n on m em b er s en i o rs wi t h
o r wi th o uts u rv i v i n g fam i l y m em b ers an dwh o l eftl i t t l e m on ey t o co ver t h ei r b u ri al ex p en s es . Ho w ev er, KASM A o p erat edd i fferen t l y fro m i t s p ro po s ed- 1 8 -

[* 1 8 ] act i v i t i es s t at edi n th e Fo rm 1 0 2 3 an dth e l et t er d at ed J ul y 3 1 , 1 9 9 8 , i n
s i gn i fi can tway s . Onth e b as is o f th e ad m i n i s trat i v e reco rdth e Co u rtco n cl u d es th atKASM A
was n oto p erat edex cl u s iv el y fo r an ex em

p tp u rp o s e b ecau s e (1 ) i twas n o t
o p erat edt o s erv e a ch ari t ab l e cl as s , (2 ) i to perat edi n a co m m erci al m an n er, an d (3 ) i t s act i v i t i es s erv eda p ri v at e rat h er th an p ub l ic i n t eres t
. A. KASM A Di dNo tOp erat e To Serv e a Ch ari t ab l e Cl as s . KASM A arg u es thati t s erv es a reco gn i zedch ari t ab l e cl as s : th e el d erl y . Ho wev er, b ecau s e KASM A d i dn o tp ro v id e b u ri al b en efi t s t o th e el d erl y wi th o ut reg ardt o th ei r ab i l i ty

t o p ay th ei r fu n eral ex p en s es o r es t ab l is h thatth e
m em b ers h i p ap p l icat i o n fee o f $ 1 5 0 an dthe o th er an nu al fees o f $ 3 0 0 t o $ 3 5 0
co n st i tu t edn o m i n al ch arg es , KASM A d i dn o to p erat e t o s erv e th e reco g n i zed ch ari t ab le cl as s o f t h e el d erl y . Up o n t h e d eat h o f a m em b er, KASM Awo u l d p ay

an am o u n tt o ward s th e fu n eral ex p en s es d i rect l y t o th e fu n eral h om e. Th e am o u n t p ai dwas cal cu l at edo n th e b as i s o f t h e nu m

b er o f y ears th e d eceas edh adb een a m em ber. KASM A al so
wo u l dp ay

t o th e s u rv i v in g fam i l y o f t h e d eceas edm em b er an ad d i t i o n al am o u n t
acco rd i n g t o a Ko rean trad it i on . KASM A d i dn o tp ay th es e b uri al b en efi t s t o- 1 9 -

[* 1 9 ] n o n m em

b er s en io rs wi th o r wi th o u ts u rv i v i n g fam i l y m em b ers wh o h adl i t t le
m o ney t o co ver b u ri al ex p en s es . Res p o n d en th as reco g ni zedth at an o rg an i zat i o n s erv es a ch ari t ab le p u rp o s e wh en i tp ro v i d es fo r t h e s p eci al n eed s o f t h e el d erl y wh ere t h e el em en t s o f rel i ef o f d i s tres s an dco m

m u n i ty b en efi tare p res en t . See El Pas o Del Ag u i l a El derl y v . Co m m i s s i o n er, T.C. M em o . 1 9 9 2 -4 4 1 , 1 9 92 Tax Ct . M em o LEXIS 4 6 4 , at* 9
-
* 1 0
. 8 Res p o n den th as ru l edth atan o rg an izat i o n p ro v i d es fo r th e s p eci al n eed s o f th e el d erl y

b y rel i ev in g d i s tres s wh en i tp ro v i des g o o d s o r s erv i ces t o the el d erl y at
s ub s t an t i al l y

b el o w co sto r wi th o u treg ardt o an i n d iv i du al ’ s ab il i ty t o p ay . See Rev
. Ru l . 7 9 -1 8 , 1 9 7 9 -1 C.B. 1 9 4 (d et erm i n i n g t h atan o rg an i zat io n was o perat ed
ex cl u s i v el y

fo r ch ari t ab le p u rp o s es wh en i tp ro v i d eds p eci al l y d es i g n edh o u s i n g t o el d erl y p ers o n s at th e l o wes tco s tfeas i b l e an dal l o wedt en an t s t o rem ai n i n th e h o u s in g i f t h ey

b ecam e u n ab l e t o p ay

th e m o n th ly

fee); Rev
. Ru l . 7 7 -2 46 , 1 9 7 7 -2 C.B. 1 9 0 (d et erm i n i n g th atan o rg an i zat i o n was o p erat ed ex cl us i v el y fo r a ch ari t ab le p u rp o s e wh en i tp ro v i d edl ow co s t tran s p o rt at i o n t o s en i o r ci t i zen s an d

8 Wh il e rev en u e ru l in g s are n o tb i n d i ng o n the Co u rt , th e Co u rth as h el dth at th e Co m m i s s i o n er i s b ou n db y

l o n g s t an d i n g an dcl earl y art i cu l at edad m i ni s trat i ve p o s i t i on s s etfo rt h i n rev en u e ru l i n g s . Rau en h o rs tv . Co m m i s s i o n er, 1 19 T.C. 1 5 7 , 1 7 1 (2 00 2 ). Res p o nd en th as reco gn i zedthati n ci t in g t o the rev enu e ru l i n gs d i s cu s s edh e i n d i cat es thath e ag rees wi th th o s e ru l i n g s. Res p o n d en t , h o wev er, arg u es th atth e p o si t i on s art i cu l at edi n t h o s e ru l i n g s are p rem i s edo n fact s th atare d i fferen t fro m

h o wKASM Ao p erat es .- 2 0 -

[* 2 0 ] h an d i cap p edp ers o n s , an act i v i ty thatwas d i rect edt oward s m eet i n g t h e
s p eci al n eed s o f t h es e ch ari t ab l e cl as s es o f i n d i v i du al s ); Rev
. Ru l . 7 6 -2 4 4 , 1 9 7 6 -1 C.B. 1 5 5 (d et erm i n i n g th atan o rg an i zat i o n was o p erat ed ex cl us i v el y fo r a ch ari t ab le p u rp o s e wh en i tp ro v i d edh o m e d el iv ery o f m eal s t o th e el d erl y

an d h an di cap p edfo r a fee ap p ro x i m at i n g th e co sto f t h e m eal s b u treduced ch arg es fo r th o s e u n ab l e t o p ay

th e fu l l am o u n tan dd i dn o td is co n ti n u e t h e s erv i ce i f a p ers o n b ecam e u n ab l e t o p ay ); Rev . Ru l . 7 5 -3 8 5 , 1 9 7 5 -2 C.B. 2 0 5 (d et erm i ni n g th atan
o rg an i zat i o n was o p erat edex cl u s i v el y fo r a ch ari t ab le p u rp o se wh en i to p erat eda
ru ral res th om e an d ad m i t tedp o o r el d erl y i n d i v idu al s fo r two weeks t ay s fo r a
n o m i n al fee); Rev . Ru l . 7 5 -1 9 8, 1 9 7 5 -1 C.B. 1 5 7 (d et erm i n in g th atan
o rg an i zat i o n was o p erat edex cl u s i v el y fo r a ch ari t ab le p u rp o se wh en i tes t ab l i s h ed
a s en i o r cen t er t h atp ro v i d ed i n fo rm at i o n, referral , an dco u n s el i n g s erv i ces rel at i n g t o h eal th , h o u s in g , fi nan ces , edu cat i o n , an dem pl o ym en t, an ds p eci al ized recreat i o n al s erv i ces t o s en i o r ci t i zen s wh o d i dn oth av e t o b e m em bers t o acces s th e s en i o r cen t er an d i t s s erv i ces ); Rev . Ru l . 6 1 -7 2, 1 9 61 -1 C.B. 1 8 8 (d et erm i n i n g th atan o rg an i zat i o n was o p erat ed ex cl us i v el y fo r a ch ari tab l e p u rp o s e wh en i t p ro v id eda h o m e fo r th e ag edatrat es s ubs t an t i al l y l es s th an th e co sto f t h e
s erv i ces fu rn i s hed ).- 2 1 -

[* 2 1 ] Un l i ke t h e o rg an izat i o n s d es cri b edi n th e rev en u e ru l i n g s , KASM A’ s p ri m ary act i v i ty was n o t d i rect edt o ward s m eet in g th e s peci al n eed s o f t h e ch ari t ab le cl as s, th e el d erl y , b y rel i ev i n g d i s tres s o r p ro v id i ng a co m m u n i ty b en efi t . KASM Ap ro v i d ed b u ri al b en efi t s o n l y t o i t s m em

b ers wh o p ai ddu es , n o t t o n o n -du es -p ay i n g s en i o rs i n th e co m m u n i ty . If a m em

b er fai l edt o p ay

th e req u i redm em

b ers h i p du es fo r 9 0 d ay s aft er recei v i ng a wri t t enn o t i ce req u es t i n g p aym en t , KASM A’ s b o ardo f d i rect o rs co u l dt erm i n at e t h e m em b ers h ip an di t s
o b l i g at i o n t o p ay

an y b u ri al b en efi t s . Ad d it i on al l y , th e am o u n to f t h e b u ri al b en efi tp ai d was cal cu lat edo n th e b as i s o f t h e nu m

b er o f y ears th e d eceas edm em b er h adp ai dthe o th er fees rat h er th an th e i n ab il i ty

o f t h e d eceas edm em

b er t o p ay

b u ri al ex p en s es . See Ret i red Teach ers Leg al Def. Fu n d , In c. v . Co m m i s s i o n er, 7 8 T.C. 2 8 0 , 2 9 0 (1 98 2 ) (“ [A] l th o u g h al l o f t h e b en efi ci ari es o f * * * [t he t ax p ay er’ s ] p u rp o s es are el d erl y i n d i v i du al s , ai d t o p en s i on ers wi th o u treg ardt o n eed , h as b een h el dn o t a ch ari t ab le p u rp o s e.”). Fu rt her, t h ere i s n o tan y ev i d en ce i n t h e ad m i n i st rat i v e
reco rdth atth e m em

b ers h i p du es an dth e o th er an nu al fees th atm em b ers were ch arg ed w ere n o m i n al am o u n t s. 9

9 Pet i t i on er i n i ts o p en i ng b ri ef ci tedRev
. Ru l . 7 2 -1 2 4 , 1 9 7 2 -1 C.B. 1 4 5 , an d Rev
. Ru l . 7 9 -1 7 , 1 9 7 9 -1 C.B. 1 9 3 , i n s up p orto f i ts as s ert i o n t h ati ts erv eda (co n ti n u ed ...)- 2 2 -

[* 2 2 ] KASM A d id n o to p erat e t o p ro v i d e b uri al b en efi ts fo r el d erl y p ers o n s wh o
were n o t m em

b ers an dwh o co u l dn o t affo rdfu n eral ex p en s es . KASM A rep res en t edi n co rres p o n d en ce, i n co n n ect i o n wi th i t s ap p l i cat i o n fo r t ax -ex em p t
s t atu s, th ati two u l du s e res erv e fu n d s t o p ro v i d e b u ri al b en efi t s fo r el d erl y p ers o n s

9 (...co n t in u ed ) ch ari t ab le cl as s. As i n d icat ed , rev en u e ru l i n g s are n o tb in d i n g o n the Co u rt . See s up ra n o t e 8 . Nev ert h el es s , th e fact s i n tho s e rev en u e ru l i n g s are d i s t i n gu i s h ab l e fro m h o wKASM A o p erat ed . InRev . Ru l . 7 2 -1 2 4 , s up ra, t h e o rg an i zat i o n was fo rm edb y

l ead ers o f a ch u rch co n g reg at i o n t o o p erat e a h o m e fo r t he ag ed . Th e o rg an i zat i o n ch arg ed a fee t o res i d en t s i n th e h o m e; b u to n ce a p ers o n was ad m i t t edt o th e h o m e, i f t hey b ecam e u n ab l e t o p ay

th e m o n th l y

ch arg es th e o rg an i zat i o n wo u l dp ay th e m o n t h l y fees o u to f i t s res erv es o r s eeks up p o rtfro m l o cal an dFed eral wel fare p ro g ram s , m em b ers o f t h e ch u rch co n greg at i o n , o r g en eral p ub l i c. Id . Th e ad m in i s t rat iv e reco rdi n th i s cas e i n d i cat es th ati f a m em b er s t o p p edp ay i n g du es , th e m em ber’ s m em

b ers h i p was t erm i nat ed . Thu s wh en th atp ers o n d i ed , h e o r s h e was n o l o n ger el i g i b l e t o recei v e a m em b er’ s b u ri al b en efi t . Fu rt h er, t h e ad m i n i s trat i v e reco rdd o es n o t s h ow t h atKASM A u s ed i t s s u rp l u s fu n d s t o p ay

b u ri al b en efi ts fo r n o n m em b ers wh o co u l dn o t affo rdt o p ay th em . In Rev . Ru l . 7 9 -1 7 , s up ra, t h e o rg an izat i o n , a n o np ro fi t h o s pi ce, was o p erat edt o p ro v i d e b o th i np at ien tan do u tp at i en tas s i s t an ce t o p at i en t s o f al l ag es wh o h ad b een ad v i sedb y a p h y s i ci an th ey

were t erm i n al l y

i l l . Th e o rg an i zat i o n ’ s fu n d s were d eri v edfro m

a reas o n ab l e fee ch arg ed fo r i t s s erv i ces an d d on at i o n s b y th e p ubl i c. Th e IRS ru l edth atb y al l ev i at i ng th e m en t al an dp h y s i cal d i s tres s o f p ers o n s t erm i n al l y

i l l, th e o rg an i zat i o n rel i ev edth e d i s tres s edwi th i n th e m ean i ng o f s ec. 1 .5 0 1 (c)(3 )-1 (d )(2 ), In co m e Tax Reg s . KASM A d o es n o tal l ev i at e t h e m en t al o r p h y s i cal di s tres s o f i t s m em b ers . KASM A d o es n o tp ro v i d e an y as s i s tan ce t o m em

b ers wh o are t erm i n al l y

i l l. Rat h er, t h ro u g h th e co l l ect io n o f m em b ers h i p du es an do th er fees KASM A o ffers m o n et ary as s i s t an ce: th e p aym en t o f a m em b er’ s b u ri al b en efi t s cal cu lat edo n th e b as i s o f t h e m em b ers h i p du es an d o th er fees p ai db y

th atm em b er du ri n g h is o r h er m em b ers h i p .- 2 3 -

[* 2 3 ] wh o were n o t m em b ers an dwh o co u l dn o taffo rdfu n eral ex p en s es , b u ti td i d
n o to p erat e i n acco rd an ce wi th th atrep res en t at i o n . KASM A s eti t s m em

b er fee s tru ctu re i n a way t o co ver i ts o p erat in g
ex p en s es an d t o accu m

u l at e s ub s t an t i al res erv e fu n d s . KASM A d i dn o tu se t h e
accu m ul at edfu n d s t o p ro v i d e b u ri al b en efi t s fo r el d erl y n o n m em b ers wh o co u l d
n o taffo rdfu n eral ex pen s es o r m em b ers wh o were u n ab l e t o p ay al l o f t h ei r
m em b ers h i p du es . See El Pas o Del Ag u il a El d erl y v . Co m m i s s io n er, 1 9 9 2 Tax Ct
. M em o LEXIS 4 64 , at* 1 1 -* 1 2 (up h ol d in g a d et erm i n at i o n d en y i n g t ax -ex em p t
s t atu s t o an o rg an i zat i o n wh i ch h adb een o rg an i zedt o p ro v i d e a b u ri al p l an t o th e el d erl y atl o w co s tb ecau s e i to p erat ed t o p ay th e b u ri al p l an o n l y

t o i t s m em

b ers wh o p ai dp rem i u m s ). In s t ead , KASM A u s eda p o rt i o n o f t h e accu m ul at edfu n d s t o p u rch as e an o ffi ce co n d om i ni u m wi th cas h i n 2 0 08
. Ad d it i on al l y , KASM A d i dn o ts erv e t h e p o or, an o th er reco g n i zedch ari t ab l e cl as s . “ Ch ari t ab l e” fo r p u rp o s es o f s ect i o n 5 0 1 (c)(3 ) i n cl u d es rel i ef o f t h e p o o r
an d d i st res s ed o r o f t h e u n d erp ri v i l eg ed . Sec. 1 .5 01 (c)(3 )-1 (d )(2 ), In co m e Tax Reg s. Al th o u g h KASM Am en t i o n eda g o al o f p ro v i d in g b u ri al b en efi t s t o p o o r
n o n m em bers , i t d i dn o t . KASM A al s o rep res en t edth atwh eni th adaccu m u l at ed
s u ffi ci en tfu n d s i two u l dp ro v i d e s ch o l ars h ip s t o n eedy s tud en t s. Itd i d n o t . M ere
s t at em en t s o f i n t en tare i n s uffi ci en tt o m eetKASM A’ s b u rd en o f p ro v i ng i t- 2 4 -

[* 2 4 ] o p erat edex cl u s i v el y fo r ch ari t ab l e p u rp o s es . See El Pas o Del Ag u i l a El d erl y v . Co m m i s si o n er, 1 9 9 2 Tax Ct . M em o LEXIS 4 6 4 , at* 1 2
. B. KASM A Op erat edi n a Co m m erci al M an n er. KASM A o perat edi n a fee-fo r-s erv i ce m an n er. Wh en an o rg an i zat i o n
co n du ct s a b u s i n es s i n a co m m erci al m an n er, t hatfactwei g h s h eav il y ag ai n s t
ex em p t i o n . Li v i n g Fai th , In c. v . Co m m i s s i o n er, 9 5 0 F.2 d3 6 5, 3 7 3 (7 th Ci r. 1 9 9 1 ), aff’ g T.C. M em o . 1 9 9 0 -4 8 4. “ Th e p art i cu l ar m an n er i n wh i ch an
o rg an i zat i o n ’ s act i v i ti es are co ndu ct ed , the co m m erci al h u e o f t h o s e act i v it i es , co m p et i t i o n wi th co m

m erci al fi rm s , an d th e ex i s t en ce an dam o u n t o f an nu al o r
accu m ul at edp ro fi t s , are al l rel ev an tev i d en ce i n d et erm i n i n g wh et h er an
o rg an i zat i o n h as a s ubs t an t i al no n ex em p tp u rp o s e.” Id
. at3 7 2 . Wh en an
o rg an i zat i o n en g ag es i n a s ub s t an t i al fee-fo r-s erv i ce o r o th er b u s i nes s act i vi ty an d th e act i v i ty

d o es n o tfu rt h er th e o rg an i zat i o n’ s ex em p t p u rp o s e, t h e o rg an i zat i o n i s
n o to p erat edex cl u s iv el y

fo r anex em

p tp u rp o s e. Sec. 1
. 5 0 1 (c)(3 )-1 (c)(1 ), In co m e Tax Reg s .; s ee Part n ers i n Ch ari ty , In c. v . Co m m i s s i o n er, 1 4 1 T.C. at1 6 8 -1 6 9
. KASM A’ s b u ri al b en efi t s act i v i ty was co n du ct edb y

co l l ect in g m em

b ers h i p du es an dad d i t i o n al fees wh en m em b ers d i edan d p ay i n g o utb u ri al b en efi t s t o fam i l i es o f d eceas ed m em b ers co rrel at edwi th th e n u m b er o f y ears th e m em

b er h ad p ai d . Fo r TYE Ap ri l 3 0 , 2 0 1 3 , KASM A rep o rt edthati t h adp ai db u ri al b en efi ts o f- 2 5 -

[* 2 5 ] $ 1 ,9 90 , 5 7 4 t o 1 4 0 fam i l i es , o r an av erag e o f $ 1 4 ,2 1 8 p er fam i l y . KASM A
o p erat edi n a co m

m erci al m an n er b y

p ro v id i n g b u ri al b en efi t s o n t h e b as i s o f p aym en t s o v er t i m e b y

i ts m em b ers o f m em

b ers h ip du es an d o th er fees
. C. KASM A Di dNo tServ e a Pub l i c In t eres t
. Ano rg an i zat i o n i s n oto p erat edfo r an ex em p t p u rp o s e u n l es s i ts erv es a p ub l i c rat h er t h an p ri vat e i n t eres t . Red l an d s Su rg i cal Serv s . v . Co m m is si o n er, 1 1 3 T.C. 4 7 (1 9 9 9 ), aff’ d , 2 4 2 F.3 d9 0 4 (9 th Ci r. 2 0 01 ). KASM A p oi nt s t o Pas s ai c Un i t edHeb rew Bu ri al As s ’ n v . Un i tedSt at es , 2 1 6 F. Sup p . 5 0 0 (D.N.J . 1 9 6 3 ), t o s up p orti t s arg u m en tth ati td i d n oto p erat e fo r a “ p ri v at e b en efi t ”, o r m ore s peci fi cal l y , th atn o p arto f i t s n etearn i n g s i n u redt o th e b en efi to f t h e p ri v at e i n d i v idu al s wh o were m em b ers b ecau se n o b en efi tt o KASM A’ s m em

b ers fl o wed un t i l d eat h . KASM A m i sco n s tru es th e o v erl ap p i n g ch aract eri s ti cs o f t h e p ri vat e b en efi tan dp ri v at e i n u rem en tp ro hi b it i on s . Th e Co u rth as co n s i s t en tl y reco g n izedthatwh i l e t h e p ro h i b i t i o n s ag ai n s t p ri v at e i n u rem en tan d p ri v at e b en efi t s s hare co m m o n an d o ft en o v erl ap pi n g el em en t s , th e t wo are d i s t i n ctreq u i rem en t s wh i ch m u s t b e s at i s fi edi n dep en d en t l y . Am . Cam p ai g n Acad . v . Co m

m i s s i o n er, 9 2 T.C. 1 0 5 3, 1 0 6 8 (1 9 89 ). “ Th e ab s en ce
o f p ri v at e i n u rem en to f earn i n g s t o th e b en efi t o f a p ri v at e s h areh ol der o r i n d i v i du al d o es n o t , h o wev er, es t ab l i s h th atthe o rg an i zat i on i s o perat ed- 2 6 -

[* 2 6 ] ex cl u s i v el y fo r ex em p t p u rp o s es . Th erefo re, wh il e t h e p ri v at e i n u rem en t p ro h ib i t i on m ay

arg u ab l y b e s ub s u m ed wi th i n th e p ri v at e b en efi tan al y s i s o f t h e
o p erat i o n al t es t, the rev ers e i s n o ttru e.” Id
. at1 0 6 8 -1 0 6 9. If t h e Co u rtco n cl u d es th atn o p ro h i bi t edi n u rem en to f earn in g s ex is ts , i t
can n ots t o p th ere b u tm

us t in qu i re fu rther an d d et erm in e wh et h er a p ro h ib i t ed p ri v at e b en efi t i s co n ferred . See i d . at1 0 6 9
. Th erefo re, as s um i n g wi th o u td eci di n g th at n o n e o f KASM A’ s earn i n g s i n u redt o the b en efi to f a p ri v at e s h areh o l d er o r i n di v i du al , th e Co u rt m u sts t i l l d et erm i n e i f i t co n ferred a p ri v at e b en efi t . KASM A p ai d b u ri al b en efi t s o f d eceas edm em

bers . Th e ad m i n i s trat i v e reco rdd oes n o t refl ectth at KASM A p ro v id edo th er s erv ices fo r n o n m em b er s en i o rs o r s ch o l ars h ip award s t o n eed y
s tud en t s . Th erefo re, KASM A’ s p ri m ary act i v i ty co n ferred a p ri v at e b en efi t . See Ret i redTeach ers Leg al Def. Fu n d , In c. v . Co m m i s s i o n er, 7 8 T.C. 2 8 0 (d eci d i n g th atan o rg an i zat i o n o rg an i zed t o p res erv e t h e fi n an ci al s t ab i li ty o f t h e New Yo rk Ci ty Teach ers Ret i rem en tSy st em an dth e co n tri b u t i o n s an dp en s i o n s o f ret i ree
m em b ers o f t he s y s t em

s erv ed th e p ri v at e i n teres to f i t s m em b ers ). KASM A arg u es thati t s m em b ers h ip was o p ent o “ al l s en i ors fro m th e ag e
o f 5 5 t o 90 y ears o l d , res i di n g i n th e m et ro p o l i t anNew Yo rkarea, wh o s upp o rtth e p u rp os es o f * * * [KASM A ] ” an dth ati t s o rg an i zat io n i s l i k e t h e o rg an i zat i o n i n- 2 7 -

[* 2 7 ] So u n dHeal th As s ’ n v . Co m m i s s i o n er, 7 1 T.C. 1 5 8 , 1 8 5 (1 9 7 8), wh i ch was g ran t edt ax -ex em

p ts t atus wh en th e “ cl as s o f p o s s i b le m em b ers o f t h e As so ci at i on i s , fo r al l p ract i cal p u rp o s es , th e cl as s o f m em b ers o f t h e co m

m u n it y i t s el f.” Ho wev er, th e o rg an i zat i o n i n So u n dHeal th As s ’ n i s d i s t i n g u i s hab l e fro m KASM A b ecau s e as a p ro v i d er o f m ed i cal s erv i ces , i ts erv ed th e ch ari t ab l e p u rp os e o f p ro m o t i n g h eal th i n th e co m m u n i t i es i ts erv ed . So u n d Heal th As s oci at i o n o p erat ed t o b en efi tth e co m m u ni ty b y p ro v id i n g s o m e h eal th s erv i ces fo r n o n m em

b ers o n a fee-fo r-s erv ice b as i s , o p erat i n g a s ub s id i zeddu es p ro g ram , ru n n in g an em erg en cy

care faci l i ty

th attreat edm em

b ers an dn o nm em

b ers reg ard l es s o f th ei r ab i l i ty t o p ay , an do fferi n g edu cat i o n al p ro g ram s t o th e p ub l i c. Id . at1 8 4 -1 8 5 . Inco n tras t , KASM A d i dn o tp ro v i d e b uri al b en efi ts t o
n o n m em bers o f t h e co m

m u n it y an dd i dn o tp ro v id e a s ub s id i zeddu es p ro g ram . KASM A h as n o tes t ab li s h edthati tp ri m ari l y b en efi t edth e co m

m u n it y , an d th erefo re i td i d n o ts erv e a p ub l i c b en efi t
. Th e Co u rtco n cl u d es th atKASM A d i dn o to p erat e ex cl u si v el y fo r o n e o r
m o re ex em

p tp u rp o s es wi th i n th e m ean i ng o f s ect i o n 5 0 1 (c)(3 ). Acco rd i n g l y , KASM A h as n o tm et i t s b u rd en o f p ro v i n g th atres p o n d en t’ s d et erm i n at i o n t o
rev o k e i t s t ax -ex em

p ts t atu s effect i v e Sep t em b er 6 , 2 0 1 7 , an dp ro sp ect i v el y was
erro neo u s .- 2 8 -

[* 2 8 ] III. Res p o nd en tIs No tEqu it ab l y Es to p p edFro m

Rev o k i ng KASM A’ s Tax -Ex em

p t St atu s . KASM A as s ert s thatres p o n d en t s ho u ldb e eq u i t ab l y es to p p edfro m
rev o k i n g i t s t ax -ex em

p ts t atu s b ecau s e t he IRS (1 ) req u es t edKASM A t o am en di t s art i cl es o f i n co rp o rat i o n t o refl ecta ch ari t ab l e p u rp o s e, wh i ch i t d i d, (2 ) g ran t ed KASM A t ax -ex em

p ts t atu s i n 1 9 98 , an d (3 ) affi rm edKASM A ’ s t ax -ex em p ts t atu s i n 2 0 0 4. KASM A arg ues th at i twi l l s u ffer a d et ri m en tfro m the l o s s o f th e ex em

p t
s t atu s b ecau s e i t wi l l l os e ex em p t i o n s fro m

New Yo rkSt at e an dCi ty s al es t ax an d i t w i l l l i kel y

“ l o s e s o m e o f t h e g o o dwi l l i t h as b u i ltup am o n g i t s m em b ers an dth e l o cal co m m u n i ty ”. Equ i t ab l e es t o p p el i s a ju d i ci al d o ctri n e t h at“p recl u d es a p art y fro m d en y i n g h i s o wnact s o r rep res en t at i on s wh i ch i n du cedan o th er t o actt o h i s d et ri m en t .” Graff v . Co m m i s s i o n er, 7 4 T.C. 7 4 3, 7 6 1 (1 9 8 0), aff’ d, 6 7 3 F.2 d7 8 4 (5 th Ci r. 1 9 8 2 ); s ee M eg i b o w v . Co m m i s s io n er, T.C. M em o . 2 0 0 4 -4 1 , 2 0 0 4 Tax Ct . M em o LEXIS 4 3 , at* 2 3. “ Th e d o ct ri n e o f [eq ui t ab l e] es t o p pel i s b as edup o n th e g ro u n d s o f p ub l i c p o l icy , fai r d eal i ng , g o o dfai th , an d ju s ti ce an d i s d es i g n ed t o ai dth e l aw i n the ad m i n i s trat i o n o f ju s t i ce wh ere wi th ou t i t s ai di n ju s ti ce m i g h t
res u l t.” Graff v . Co m

m i s si o ner, 7 4 T.C. at7 6 1
.- 2 9 -

[* 2 9 ] “ [T] h e Go v ern m en tm ay n o tb e es t o pp ed o n th e s am e t erm s as an y o th er l i ti g an t .” Heck l er v . Cmty . Heal th Serv s. o f Crawfo rdCt y ., In c., 4 6 7 U.S. 5 1 , 6 0 (1 9 8 4); s ee OPM v . Ri ch m o n d , 4 9 6 U.S. 4 1 4 , 4 1 9 (1 99 0 ). Th e g en eral ru l e i s th at th e Go v ern m en t i s n ei th er b o u ndn o r es t o p p ed b y th e act s o f i t s o ffi cers an dag en t s i n en t eri n g i n t o an ag reem en to r arran g em en tt o d o o r cau s e t o b e d o n e wh atth e l aw d oes n otp erm i to r s an ct i o n . Graff v
. Co m m i s s i o n er, 7 4 T.C. at7 6 2
. Equ it ab le es to p p el h as b een ap p l i edag ai n s tth e Go v ern m en to n l y wh ere ju s t i ce
an d fai r p l ay

req u i re i t . Id . at7 6 1
. In v o k i ng th e d o ctri ne o f equ i t ab l e es t o p pel ag ai n s t th e Go v ern m en t“ m u s t b e t reat edwi th th e u tm o stcau t i o n , s i n ce i t s s an ct i o n i n an y cas e wo ul d res u l ti n h av in g i n d i v i du al t ax l i ab il i ty d ep en d , n o t up o n t h e fact o rs an dm eas u res p res cri bed b y

Co n g res s as ap p li cab l e t o al l , b u tup o n th e s t at em en t s an d co n du ct
o f a p art i cu l ar Go v ern m en t o ffi cer i n res p ecto f each i n d i v i du al .” Co u zen s v . Co m m i s s i o n er, 1 1 B.T.A. 1 0 4 0 , 1 1 4 8 (1 9 28 ). Th u s th e d oct ri n e o f eq u i t ab l e
es t o p p el i s ap p l i ed ag ai ns t th e Co m m i s s i o n er o n l y

wi th u t m o s tcau t i o n an d
res trai n t . Sch u s t er v . Co m m is s i o n er, 3 1 2 F.2 d3 1 1 , 3 17 (9 th Ci r. 1 96 2 ), aff’ g 3 2 T.C. 9 9 8 (1 9 5 9 ), an drev ’ g 3 2 T.C. 1 0 1 7 (1 9 5 9); M cCo rk l e v . Co m m i s si o n er, 1 2 4 T.C. 5 6 , 6 8 (2 00 5 ); Ho fs t et t er v . Co m m i s s i o n er, 9 8 T.C. 6 9 5 , 7 00 (1 99 2 ); Graff v
.- 3 0 -

[* 3 0 ] Co m

m i s si o n er, 7 4 T.C. at7 61 ; Es tat e o f Em ers o n v . Co m m i s s i o n er, 6 7 T.C. 6 1 2 , 6 1 7 (1 9 7 7). Th e es s en t i al el em en ts o f es t o p p el are: “ (1 ) [t ] h ere m u stb e a fal s e rep res en t at i o n o r wro n g fu l m i s l ead i n g s i l en ce; (2 ) t h e erro r m u s t b e i n a s tat em en t
o f fact an d n o ti n an o p in io n o r a s t at em en to f l aw; (3 ) th e p ers on cl ai m i ng th e b en efi t s o f es t o p p el m

u s tb e i g n o ran to f t h e t ru e fact s ; an d(4 ) h e m u s t b e ad v ers el y affect edb y

th e act s o r s t at em en t s o f t h e p ers o n ag ai n st wh o m an
es t o p p el i s cl ai m ed .” Es t at e o f Em ers o n v . Co m m i s s i o n er, 6 7 T.C. at6 17 -6 1 8
. Th e d ifferen ce b et ween m i s t ak es o f fact an dm i st ak es o f l aw i s fu n d am en t al wh en d eal i ng wi th th e d o ct ri n e o f eq ui t ab l e es t o pp el . See, e.g ., Gi n s b erg v . Co m m i s s i o n er, 2 4 T.C. 2 73 , 2 7 8 (1 9 5 5 ). Th e IRS’ d eci s i o n t o g ran tKASM A t ax -ex em p t s t atu s i n 1 9 9 8 was a
m i s t ak e o f l aw b y

the IRS, n o ta m i s t ak e o f fact . Equ i tab l e es t op p el d o es n o tb ar
o r p rev en tth e IRS fro m co rrect i n g a m i s t ak e o f l aw. Au to . Cl ub o f M i ch . v . Co m m i s s i o n er, 3 5 3 U.S. 1 8 0 , 1 8 3 -1 8 4 (1 9 5 7); Sch u s t er v . Co m m is s i o n er, 3 1 2 F.2 dat 3 17 ; s ee W il k i n s v . Co m m is s i o n er, 1 2 0 T.C. 1 0 9 , 1 13 (2 0 0 3 ). To qu al i fy

as an ex em

pto rg an i zat i o n d es cri b edi n s ect i o n 5 0 1 (c)(3 ), a
co rp o rat i o n m

u s td em o n s trat e t h ati ti s o rg an i zed an d o p erat edex cl u s i v el y fo r rel i g io u s, ch ari t ab l e, s ci en t i fi c, edu cat i o n al , o r o ther s peci fi edex em p tp u rp o s es .- 3 1 -

[* 3 1 ] KASM A was n o to perat edex cl u s i v el y fo r an y o f t h e p u rp os es i n d i cat edi n
s ect i on 5 0 1 (c)(3 ) b ecau s e KASM A was a m em b ers hi p o rg an i zat i o n wh o se m ai n p u rp os e was t o p ro v i de b uri al g ran t s fo r t h e p ri vat e b en efi to f i ts m em b ers . Th erefo re, t h e l aw d o es n o tp erm i tKASM A t o qual i fy as an ex em

p t o rg an i zat i o n d es cri b edi n s ect i o n 5 0 1 (c)(3 ). By g ran t i ng KASM A t ax -ex em p t s tatu s th e IRS i n co rrect ly ap p l i edth e l aw req u i ri n g t h ata co rp orat io n o p erat e ex cl us i v el y fo r t ax -ex em

p tp u rp o s es . Th e IRS
m ay co rrectm is t ak es o f l aw “ ev en wh ere a t ax p ay er m ay h av e rel iedt o h i s d et ri m en to n th e * * * [IRS’ ] m i s t ak e.” Di x o n v . Un i t edSt at es , 3 8 1 U.S. 6 8 , 7 3 (1 9 6 5); s ee Green fel dv . Co m m i s s i on er, T.C. M em o . 1 9 6 6 -8 3, 1 9 66 Tax Ct
. M em o LEXIS 2 01 , at* 5 (h o l d i n g th e IRS was n o t es t o p pedfro m d i s al l o wi n g n et l o s s es aft er fai l i n g t o m ak e s u ch ch an g es du ri n g au d i t s o f p ri o r y ear t ax retu rn s ). Th e IRS h as th e p ower t o co rrect m i s t ak es o f l aw b ecau se an IRS em p l o y ee b y
n eg lecto r o th erwi s e can n o tb i n dth e IRS t o an erro n eo u s i n t erp ret at i o n o f l aw. Graff v . Co m

m i s s i o n er, 7 4 T.C. at7 6 2. Th u s , th e IRS i s n o t es t o p p edfro m co rrect i ng th e m i s t ak e o f l aw. Acco rd in g ly , th e Co u rtco n cl u des th atequ i t ab le es t o p p el i s n o tap p l i cab l e an d
res p o n d en t i s n o tes t o p p edfro m d et erm i n i n g th atKASM A i s n o tan o rg an i zat i o n d es cri b edi n s ect i o n 5 0 1 (c)(3 ).- 3 2 -

[* 3 2 ] Th e Co u rth as co n s i d eredal l o f t h e arg um en t s m ad e b y th e p art i es an d , t o th e ex t en tth ey

are n o tad dres s edh erei n , th e Co u rtfi n ds th em t o b e m oo t , i rrel ev an t , o r wi th o u tm eri t
. Deci s i o n wi ll b e en t eredfo r
res p o nd en t
.