as ‘ ee oy t r e s ce ed ay qo department of the treasury internal_revenue_service te_ge eo examinations commerce street dallas tx tax_exempt_and_government_entities_division release number release date legend org organization name org address date date xx date address address person to contact identification_number contact telephone number in reply refer to te_ge review staff ein last date for filing a petition with the tax_court may 20xx certified mail return receipt requested dear a final adverse determination_letter as this is to your exempt status under sec_501 of the internal_revenue_code your exemption from federal_income_tax under sec_501 of the code is hereby revoked effective january 20xx our adverse determination was made for the following reasons section operated c not demonstrated that you are for you have charitable educational or other exempt purposes within the meaning of ilr c sec_501 and exempt under sec_501 must be organized and operated exclusively for an exempt purposes you have provided no information regarding your receipts expenditures or activities you have not established that you have operated exclusively for an exempt_purpose organizations exclusively described i r c in contributions to your organization are no longer deductible under sec_170 of the internal_revenue_code you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the year ending december 20xx and for all years thereafter processing of income_tax returns and assessment of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claim court or the district_court of the united_states for the district of columbia before the day after the date this determination was mailed to you contact the clerk of the appropriate court for the rules for initiating suits for declaratory_judgment you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access your tax information and can help you get answers you can call and ask for taxpayer_advocate assistance advocate from the site where the tax_deficiency was determined by calling tel or you can contact the taxpayer or write taxpayer_advocate assistance cannot be used as a substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations nor extend the time fixed by law that you have to file a petition in the united_states tax_court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will noufy the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours douglas h shulman commissioner by nanette m downing acting director eo examinations enclosures publication publication notice ce tax exempt and government entities org address department of the treasury internal_revenue_service date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice if we issue a determination_letter to you based on technical_advice no letter catalog number 34809f lf we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation enclosures publication publication report of examination form_6018 sincerely sunita b lough director eo examinations letter catalog number 34809f form 886-a rev date explanations of items schedule number or exhibit tax identification_number year period ended name of taxpayer org legend org organization name attorney dir-3 emp-5 co-3 co-7 g o g companies doctor doctor g qth co president president directors gth th sth co-10 co-11 emp-6 emp co-6 20xx12-20xx12 dir-4 dir-5 attn dir-2 state state 3th pmployees city city co-2 gtk xx date 2nd 28d 3rd emp-1 emp emp-3 emp-4 co-5 co-4 co-8 dir-1 co-1 dr 2np 7th qth 5th dr issues whether recognition of exempt status under internal_revenue_code irc sec_501 for org org should be revoked in the event that org has more than an insubstantial part of its activities not furthering exempt purposes and that a substantial part of its activities further a commercial purpose org has not established that it operates to serve public interests but rather serves the private purposes of its president president president and that org’s net_earnings have inured to its president president org failed to maintain adequate_records as provided by sec_6001 facts application_for exemption org employer_identification_number ein was recognized for exemption under sec_501 of the irc on january 20xx and determined to be a public charity under sec_509 and sec_170 b a vi of the irc this recognition was based on additional information and changes made to org’s initial application in a letter dated january 20xx explained below the purposes of org as provided in its application_for recognition of exemption form are to explore the questions of man’s purpose and role on earth org stated its activities consist of the following e e e e esoteric research through meditation and scholarly pursuits and meditative communication with realms of creation for the purpose of establishing wisdom to aid in the correction of problems in the physical and unseen level the recording and cataloging of this information to establish a body of work to further research of the mind to aid in evolution and contribute to interspecies communication using the information to provide consultative services to correct clients’ health and relationship problems the recording and cataloging of these case studies to add to the existing knowledge of the power of the mind form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a rev date name of taxpayer org explanations of items schedule number or exhibit tax identification_number year period ended 20xx12-20xx12 e e botanical research to further the purpose of org and literary research within herbal traditions and raise capital to purchase acreage and a botanical gardening research center to assist in healing according to part v of the articles of incorporation filed with the state of state on march 19xx org stated its purpose is to operate exclusively for educational and scientific purposes within the meaning of sec_501 officers and directors consisted of president and her two family members dir-1 who resides at the home of president and the location of org and dir-2 who resides in another state the articles state all assets of the corporation after payment of its just debts shall be transferred or distributed to an organization exempt under sec_501 of the irc the internal_revenue_service service was disinclined to grant org’s application based on the initial information within org’s application_for recognition of exemption form submitted to the service the service requested additional information in a letter dated december 19xx org replied to the service's concerns in a letter dated january 20xx in this letter org expanded its explanation of its activities and changed the members of its board as explained below org stated its exempt_purpose was to bring to the general_public modalities that will educate and assist people in the healing power of the mind and body org stated an on-going health education program will be available to the general_public through the internet and this health care program would feature self care utilizing communication with the subconscious meditation and herbal therapy additional reports publications and media presentations would be created for the health education community and the general_public as needed or requested it is org’s intent to place its research findings patents copyrights processes or formulas into the public domain for the benefit of all org claimed all of org’s research writing and tutoring work was conducted by volunteers and that all funds except legal and professional services will be applied to org’s exempt educational and scientific purposes the original application listed its officers as president and her family members and claimed president would conduct all activities because the service challenged the all-family-member board org’s changed the board_of directors from all family members to three directors dir-3 dir-4 dir-4 and dir-5 dir- org claimed president had done graduate work in business administration and that dir-4 has knowledge of the legal financial and bookkeeping requirements for a tax exempt_organization and had a strong business background president's family members dir-1 as secretary and dir-2 as vp were added back to the board at an unknown time prior to 20xx relationship with co-1 co-2 co-2 both co-2 and org incorporate principles of and a director of org president was listed as co-2’s vice president as of 20xx in their activities dir-5 is an officer of co-2 co-2’s website shows the following as staff emp-1 dir-5 emp-2 emp-3 and emp-4 emp-5 and as of 20xx president and emp-6 beginning in 20xx co-2’s website began listing president as its vice president co-2's website identifies president as follows form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page_ form 886-a rev date explanations of items name of taxpayer org ' tax identification_number schedule number or exhibit year period ended 20xx12-20xx12 president has practiced self-i-dentity through ancient method of statean massage applying the principles she is the principle broker for her real_estate company and is involved in sales and property management for over thirty years she practices the many of the payments for org’s services are from individuals listed as officers or staff of the co-2's organization as explained in more detail below org explained that many of its clients have attended classes given by the co-2 and that org's purpose is to provide individual tutoring for those individuals many of org's clients were also referred by word of mouth org does not furnish educational materials to its clients but may refer to the educational materials org’s clients purchased from co-2 returns org filed forms for the calendar years ended december 19xx through 20xx forms 990-t for calendar years ended 20xx through 20xx and form sec_941 from years 19xx through 20xx forms 990-t forms 990-t reported unrelated_business_income ubi of investment_income and loss based on its forms part iv-a support schedule org had investment losses from years 20xx 20xx and 20xx of dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure respectively the income before losses for those years was dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure for year 20xx 20xx and 20xx org reported ubi of dollar_figuredollar_figure dollar_figuredollar_figure and dollar_figuredollar_figure respectively forms and documentation activities tax_year 20xx form_990 statement individuals with problems related to diabetes alzheimer’s tutorial assistance with financial problems with relationship problems and many for dietary health issues businesses concerning buying and selling properties building on lands cleaning lands and planting crops on lands family pets with stress and physical problems studied plant types to begin gathering information of a healing and recuperative nature to earth and its inhabitants according to need several individuals were provided services at no charge and useful information is provided to the general_public on the org website tax_year 20xx documentation documentation of the activities claimed on its return was requested by the service org supported the above claims with the following information form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page schedule number or exhibil form 886-a rev date explanations of items name of taxpayer tax identification_number org claim of individual's assisted year period ended 20xx12-20xx12 oo individuals with problems related to diabetes are the individuals staff and students involved with a doctoral thesis hypertension study performed by dr explained that she assisted dr with developing the tools and curriculum for dr ’s study org explained that participants attended a half day class on self identify through org’s substantiated its contributions to dr ’s study of with the following dr is not related to org president e e anemail dated 20xx from president to co-3 after cleaning and meditating the following came up as the format for the rw tea a typed and handwritten note on an unidentified page to drink tea once a week and to include shrimp and lemon in your diet which states works on high blood pressure cholesterol and heart rhythms email dated 20xx from co-3 to president regarding brain stimulation where co-3 provided president notes breathing exercise from co-2 documents that show copyright c 20xx co-1 e a page ofa log of blood pressure readings with the name ind-6 also provided was direction given by dr e e an unidentified typed page with instructions for the rainwater tea hypertension program to drink the tea once a week have blood pressure monitored one day per month places for obtaining blood pressure measurements and maintain a log of blood pressures and send these to dr email dated 20xx from dr to people including president and dir-5 dr requested blood pressure measurements and providing directions for blood pressure monitoring and a medication log alzheimer individuals were assisted during org’s counseling sessions president tutored people who referenced the need for spiritual and meditative tools to be applied to alzheimer’s disease no documentation of these counseling sessions was supplied tutorial assistance with financial problems individuals is an estimate obtained by counting the tutorial students with their family friends and associates included in this count were the verbal discussions with co-2 instructors coordinators no documentation was maintained with relationship problems org explained this was a reasonable estimate obtained by counting the tutorial students and including their family friends and associates org explained research results were the tools the use of natural butter tool for a result of letting go of negative emotions org provided no documentation of the manner in which it reached these research results org's explanations included the following additional statements doctor hired org to perform educational research through the practice and application of sith and to tutor him in the application of documentation of this activity was provided for his university research no form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a a date explanations of items schedule number or exhibit name of taxpayer tax identification_number year period ended ors doowiz200te org explained that another organization's co-2’s coordinators were given free tutorial services for their foi classes in the use and application of the cleansing process hundreds of students were assisted no documentation of these free tutorials to co-2’s coordinators was supplied yet payments for president’s services include several payments from co-2’s coordinators as explained in more detail below people had access to org’s website cleansing process tools and discussions note no discussions were in org’s website as explained later a united nations employee contacted org for tutorial services in 20xx she wanted to better understand how to apply ho’oponopono to the violent problems she understood were happening in haiti the research results were that the student reported feeling better about the situation in no documentation was maintained ind-1 was a co-2 student for many years he experienced extreme health and financial problems in 20xx and 20xx he was invited to contact org for sith tutorial research in his application of ho’oponopono to his problems he did ask for tutoring through out those years on an as need basis o the research results tool of the blueberries blueberries represent angelic kingdoms in an earthly function businesses concerning buying and selling properties building on lands cleaning lands and planting crops on lands no documentation was maintained family pets with stress and physical problems no documentation was maintained studied plant types to begin gathering information of a healing and recuperative nature to earth and its inhabitants org explained that a garden was begun in 20xx with bottle palms and yellow hibiscus planted on the president's personal_property and that comments from all who experience the garden postal carriers children neighbors visitors and landscape professionals attest to the peaceful balance and rhythm in 20xx and 20xx the project was expanded to include org’s land purchased in 20xx meditative cleansing of the land continues daily org began research on aquaculture with meditative research and purchased two books to further study ponds in may of 20xx documentation of the two books purchased was provided no further recordation was provided according to need several individuals were provided services at no charge and useful information is provided to the general_public on the org website no further recordation was provided no further documentation of the above activities was provided in a telephone interview president explained that documentation was not done because the counseling sessions were private matters president compared the counseling sessions to those of a psychiatrist or doctor and therefore they were confidential and not recorded president also stated org has conducted mostly education and less scientific research tax_year 20xx statement form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a rev date name of taxpayer _org explanations of items schedule number or exhibit t tax identification_number year period ended org conducts esoteric meditative and botanical research on the history and purpose of mankind as it relates to its basic relationships and problems of its origin and development org provides tutorial services based on its research to individuals and organizations choosing to explore and correct physical mental and relationship problems in 20xx all activities were related to research the interested general_public contributed donations throughout the year to support this research according to need several individuals were provided tutorial services at no charge and useful information is provided at no charge on the org website 20xx12-20xx12 tax_year 20xx documentation org did not maintain records of the content of structure of the counseling sessions org explained that the matters discussed with clients were of a personal nature as explained earlier the counseling sessions were not in a structured format because president's assistance to each client was based on the facts and circumstances of the client’s individual situation no recordation of research was maintained income and expenses the original returns prior to the service’s examination of 20xx and 20xx are shown below form_990 data for tax years 20xx and 20xx was obtained though publicly available internet data forms tax_year 20xx ___20xx 20xxxx 20xx ___ program service consulting fees investment inc total revenue occupancy president mba tuition educational ' office supplies _internet expenses botanical supplies legal fees miscellaneous total expenses receivables cash savings investments land buildings for 20xx educational expenses of dollar_figuredollar_figure were claimed the 20xx return dollar_figuredollar_figure were approved by the board may 20xx and dollar_figuredollar_figure paid in 20xx were reported on form_886 from an examination of president's return eorm states president claimed the expenses were reimbursed by org as org decided it was beneficial for president to obtain a masters in business administration the dollar_figuredollar_figure shown as org’s land or buildings in 20xx was instead the amount org disbursed to president for her person purchase of residential_rental_property explained later form 886-a department of the treasury-internal revenue service catalog number 20810w page publish no irs gov aller name of taxpayer org explanations of items schedule number or exhibit tax identification_number year period ended 20xx12-20xx12 total assets total liabilities form_990 part iv line provides for amounts receivable from officers no entries were made here schedule a part ill line provides a section for disclosure of loans of money or extension of credit to officers directors creators or family members org claimed it had not engaged in these acts org claimed no relationship between officers and related to org through common_control president's hours per week was reported a sec_30 hours for 20xx and hours for 20xx this claim was modified during the examination to hours per week for each year analysis of org’s records of income and expenses 20xx ---20xx consulting fees occupancy apportioned from payment to president of dollar_figure for 20xx tax insurance fees tax_year program service donations' investment_income total revenue per bank statements copies of checks president mba tuition apportioned from payment to president of dollar_figure for 20xx receivables cash checking _savings investments land in city vacant parcel unadjusted for below liability to president total assets _ total expenses paid to ind-2 for cart paid to dir-5 for rainwater tea unexplained legal fees misc supplies books on ponds total liabilities 20xx expenses on july 20xx check for dollar_figuredollar_figure was made out to president and signed by president the purpose of this payment was less than clear the original 20xx return claims dollar_figuredollar_figure was paid for her occupancy expense and dollar_figuredollar_figure for president’s education for 20xx dollar_figuredollar_figure for educational expense was approved by the board as with the 20xx expenses paid to president the board provided post approval of the 20xx expenses the following year unanimous written consent executed may 20xx signed by president dir-5 and dir- form 886-a bubiishinodtstco me ccpom me ia onesie sunyaintemall revenue senice catalog number 20810w - page_7 form 886-a pp eereen explanations of items schedule number or exhibil name of taxpayer tax identification_number year period ended _org 20xx12-20xx12 the 20xx amended_return submitted in 20xx during the services’ examination shows dollar_figuredollar_figure paid as occupancy eliminated the educational expense added investment_expense and office expense org currently claims the rent was dollar_figuredollar_figure per month dollar_figuredollar_figure org general ledger shows dollar_figuredollar_figure for furniture for 20xx org s largest payment of dollar_figuredollar_figure check was made out to cash and signed by president on august 20xx although not reflected on the 20xx return this was later explained to have been a repayment to president to be applied to the purchase of org’s land 20xx expenses for 20xx the service requested explanation of the largest expense legal expense of dollar_figuredollar_figure paid to atin org refused to provide this information on grounds that the attorney client information was privileged org’s website website research or education org's website has sections for purpose updates services research and contact information that are described below purpose the purpose page has remained unchanged from years 20xx to april 20xx updates the updates were added by 20xx and remained unchanged to april 20xx the updates list blueberries honey butter and the rolling pin’ a short paragraph accompanies each item that generally recommends to include blueberries honey and butter in one’s diet and that bottle palms yellow hibiscus are good an significant to have in your yard to fulfill a person's spiritual purpose org calls these items tools the tool of the use of a mental rolling pin is described in slightly more detail than the other tools this rolling pin tool is a process as developed by ind-3 who founded co-2 a separate organization once the service’s examination was underway by june 20xx org added to its updates page additional tools these added tools include drinking hot chocolate eating vanilla ice cream using a down filled pillow and touching plants each tool included a general statement for example eating vanilla ice cream is a spiritual tool it is the highest element of food and works to bring about peace in our organic lives the peace will be positive to our health wealth and spiritual awareness services each service was listed on a separate page with a click to order online feature the services were priced and described on org’s website from 20xx through september 20xx as follows life palmistry name of service carousel fee cards laser description of service meditative cleansing to release stress involves reading of the hands cards used to read a person situation place use mind to clean person place situation form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a rev date name of taxpayer explanations of items tax identification_number schedule number or exhibit - year period ended 20xx12-20xx12 a unblock land problems etc also fees determined individually land facility cleansing to bring rhythm and balance _ business per month- to assist student with cleaning and introspection inventory in the business after the examination of org was well underway in 20xx org changed its website to say to contact org for more details on services and the term service was changed to tutorial program and fees for services were reduced research the 20xx and 20xx archive web pages do not show research but have one inactive link to qtr 20xx the statements on its research page remained constant from 20xx through 20xx and include multiple references to org research yet no research was explained or provided a sample paragraph of the research page follows org is recording and cataloging this information for present and future benefit this body of work hopes to further research and study of the mind to aid in the unfolding of the evolution and purpose of mankind on earth and to contribute to the field of interspecies communication by april of 20xx the research pages included general statements similar to the items listed as the 20xx updates here the ice blue tool of positive mental imagery was added and is described in more detail than the other items no research is delineated contact information the contact page provides org’s president’s home address email and explains the org is a non-profit c corporation that accepts tax deductible gifts of money stocks bonds and real-estate org claims it can assist with charitable_remainder trusts gift annuities and other forms of donations the contact information has remained unchanged from 20xx to april of 20xx scientific research org provided a statement from dir-5 org’s director stating dir-5 had attended a lecture on botanical gardens service provided not-for-profit services provided by org the primary activity of org is provision of one-on-one counseling services described on org's website these services were performed by org's president president out of her home_office org neither created nor provided training materials exams or tests for its counseled clients similar for-profit services provided by president the president president provides services on the same subject matter through her for-profit businesses she offers counseling assistance tarot card and palm reading massage and sells tea president’s services form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form b86 coe explanations of items schedule number or exhibit name of taxpayer tax identification_number year period ended org are sold on other businesses’ website including dr co-4 where president's personal and business consultation services are sold as one of the products offered dr is president of co-4 and chairman emeritus of the co-2 president's services sold on the co-4 website appear to include meditations visualizations decrees cleansings and spiritual healings for individuals at one price and at another price for businesses on ind-4' website that sells creative solutions for your business problems’ president is listed as a speaker in the seminars downloads and cd’s offered for sale dr and emp-5 of are also listed as speakers in the products for sale the website states ind-4 is an internationally acclaimed speaker seminar leader and consultant she applies her knowledge insights experience and skills to assisting businesses and individuals in becoming more productive effective and prosperous 20xx12-20xx12 president is also a professional realtor and owns real-estate management companies including co-5 and co-6 and co-7 per org’s amended form_990 president's compensation from co-5 is dollar_figure and is based on reasonable industry standard president's family members dir-2 and dir-1 are both directors of org as well as compensated individuals of co-5 co-5 manages org’s real_property purchased by president in 20xx co-5 receives income from rent of residential property real_estate commission and services ina letter from org the examination_report of president’s personal returns states that the memo section of many of the checks deposited into president’s bank accounts lists carousels cleansings consultations and inventory services provided the president explained the difference between her for profit services and the services offered through org is that org clients are furthering their education though her tutoring president’s businesses and org’s services are run from the same home_office revenue president's services are the primary source of org’s revenue org’s bank records were provided for years 20xx and 20xx no other record was maintained to track or explain services sold by org org’s bank records show deposits that are primarily marked as payments for treatment consultation or inventory none are marked as payments for tutoring or education none of the 20xx payments are marked as a contribution or donation none of the 20xx payments are marked as donation or contributing until december of those december 20xx on some check payments the word donation written on the payments does not match the writing on the other areas of the checks for example the checks from dir- dir-5 president’s daughter and org’s director in the amount of dollar_figure and from ind-5 family_member of emp-6 co-2 treasurer for the amount of dollar_figure are written in cursive hand where donation is written in capital printing of the ninety two payments deposited in 20xx twenty two were made out payable to president alone form_886 from an examination of president's return states the memo section of many of the deposit into president's personal account list the services listed on org's website carousel cleansing consultations and inventory services several of the payments were from officers of org or co-2 or from their family members of the remaining payments the majority of revenue was from real-estate development or construction businesses see the tables ii below for an illustration of the payments from these parties for the tax_year 20xx org bank records reflected deposited client payments totaling dollar_figure a sampling of those payments follows the memo section notes on these payments are also included below table samples of 20xx bank receipt records form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a rev date explanations of items schedule number or exhibit name of taxpayer tax identification_number year period ended 20xx12-20xx12 org name relationship number of total amount notes on payment payments of payments out of out of dollar_figure cleansing life palmistry dir-4 consultation cleansing ind-2 _ org director treasurer dir-4 org director's wife emp-5 co-2 coordinator treatment blood pressure treatment staffing travel thanksgiving anniversary island trip thank you ho'oponopono emp-4 emp-3 co-2 staff co-8 real-estate development conducted study on thank you none for the tax_year 20xx org’s bank records reflected deposited payments totaling dollar_figure dollar_figure of these deposits dollar_figure dollar_figure of were from return_of_capital on investments and dollar_figure from investment_income the remaining from clients totaled dollar_figure most were from individuals related to org or co-2 a sampling of those payments follows table il name relationship notes on payment samples of 20xx bank receipts records number of total amount payments of payments out of out of dollar_figure dir-5 dir-5 donation org and co-2 officer president's daughter dir-4 consultation cleansing org director’s wife co-2 coordinator conducted study on emp-5 treatment trips and other ind-2 ho'oponopono emp-4 emp-3 _ co-2 staff thank you donation co-8 is a real_estate development company that has purchased tutorial services from org based on form_8734 support schedule for advanced ruling period and forms co-8 paid dollar_figure each year from 19xx to 20xx and dollar_figure per year from 20xx to 20xx from 19xx through 20xx org s gross_receipts were dollar_figure dollar_figuredollar_figure dollar_figuredollar_figure dollar_figure dollar_figure respectively based on publicly available data the payments from co-8 from 19xx to 20xx represent and of org's gross_receipts president’s use of org’s funds department of the treasury-internal revenue service form 886-a catalog number 20810w publish no irs gov page form 886-a rev date explanations of items name of taxpayer tax identification_number org president's use of funds schedule number or exhibil year period ended 20xx12-20xx12 a joint purchase and nominee agreement dated june 20xx in a letter from president signed by dir-5 shows org's intent to pool funds with president to purchase two adjacent real_estate parcels instead president used org’s funds to purchase her real_estate parcel president purchased residential_rental_property that borders the parcel of vacant land intended for org the seller of the two properties would not agree to sell the two parcels separately as org’s vacant land was land locked by president’s rental property org claims it intended to utilize the vacant land as educational and meditative research according to the assessor’s records the vacant parcel is zoned as unimproved residential the joint sale of both properties was prevented by necessary clean up of the vacant land and the seller agreed to sell president's property separately the june 20xx agreement was amended september 20xx the amendment included agreement that org will disburse to president dollar_figuredollar_figure for president’s purchase of rental real-estate for her personal_use this was to be repaid by president’s purchase of real-estate for org the amendment states org will deposit up to dollar_figuredollar_figure into the escrow to close the purchase of parcel the deposit on or before the closing will deposit up to the entire purchase_price for parcel but not less than the of the purchase of parcel amount of the deposit into the escrow for org’s purchase of parcel the amendment establishes how and when president will be repaid once she purchased parcel org issued a check to escrow for dollar_figure and a check to cash for dollar_figuredollar_figure on october 20xx on october 20xx president used dollar_figuredollar_figure of org’s funds as a down payment to purchase a dollar_figure parcel of rental real_estate for her use under the name of co-6 no promissory note was created to document the use of org’s funds the disbursement of funds was not disclosed on form_990 on the line provided for receivables from officers directors trustees and key employees’ nor on any section of form_990 for 20xx the relevant information obtained from org included the following president is abbreviated as ind-6 in the distributions and transaction explanation below org 's distributions in 20xx e e e org check to escrow check to cash signed by ind-6 total escrow and cash paid_by org 20xx 20xx 20xx dollar_figure dollar_figure_dollar_figure dollar_figure president used the total of dollar_figuredollar_figure of org’s funds as a deposit to purchase her residential rental real_estate on october 20xx of the purchase_price of dollar_figuredollar_figure president borrowed dollar_figuredollar_figure e e e ind-6 purchased real_estate org escrow and cash used by ind-6 org purchased real_estate 20xx 20xx -- dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure org's purchase in 20xx department of the treasury-internal revenue service form 886-a catalog number 20810w publish no irs gov page form 886-a rev date ‘name of taxpayer org explanations of items schedule number or exhibit tax identification_number year period ended 20xx12-20xx12 august 20xx org under the name of co-9 a company managed by president under her real-estate investment corporation co-5 inc purchased the parcel of vacant land for a total cost including taxes and fees of dollar_figuredollar_figure the cost of dollar_figuredollar_figure of org’s land includes a charge of dollar_figuredollar_figure for president's credited realtor commissions president paid funds totaling dollar_figuredollar_figure on august 20xx org paid president dollar_figuredollar_figure to be credited toward the purchase of org's land after subtracting from the sales_price of dollar_figuredollar_figure dollar_figuredollar_figure considered repayment to org and dollar_figuredollar_figure paid_by org to president the parties agree org owed president dollar_figuredollar_figure org and president created a promissory note dated august 20xx to record a principal_amount of dollar_figuredollar_figure to be paid_by org to president this promissory note is signed by president dir-4 and dir-5 m dir-5 no interest on the use of org's dollar_figuredollar_figure was computed or paid the amount actually paid_by president was dollar_figuredollar_figure after subtracting the dollar_figuredollar_figure president owed to org and dollar_figuredollar_figure org paid the amount_paid by president for the purchase of org’s property is dollar_figuredollar_figure yet the parties considered dollar_figuredollar_figure owed to president by inclusion of president’s realtor commission to the sales_price president is abbreviated as ind-6 in the distributions and transaction explanation below org land purchase amounts and credits applied e e e e two payments from ind-6 two cashier checks from ind-6 included in sales_price as commission credit total credits of purchase cost for org land e e e e org real_estate cost less disbursements to ind-6 in 20xx less amount_paid to ind-6 for land 20xx promissory note to ind-6 20xx 20xx 20xx amounts paid_by president less org’s payments to president e e e e paid_by ind-6 less amount disbursed to ind-6 in 20xx less amount_paid to ind-6 for 20xx land purchase remaining amount_paid by ind-6 dollar_figure dollar_figuredollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figuredollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figuredollar_figure dollar_figure dollar_figure dollar_figure the purchase of org's land though co-5 president's real_estate investment_company managed by president closed on august 20xx on august 20xx president deposited into her personal bank account dollar_figure from co-10 as a real_estate commission check president opened a bank account for co-9 with a deposit of dollar_figuredollar_figure march 20xx in august 20xx three payments made from the account for property taxes insurance and bank charges totaled dollar_figuredollar_figure september 20xx org transferred dollar_figuredollar_figure into the co-9 bank account and the account was closed by issuance of the remainder of dollar_figuredollar_figuredollar_figure to president this included dollar_figuredollar_figure of org’s funds adjacent rental properties owned by president form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a rev date name of taxpayer explanations of items schedule number or exhibit tax identification_number year period ended 20xx12-20xx12 org through her real-estate company co-7 president purchased a second residential rental parcel august 20xx this parcel and the rental parcel president purchased with dollar_figuredollar_figure of org’s funds in 20xx are physically connected to the parcel of land purchased for org in 20xx org's parcel of vacant land parcel of acres and president’s residential rental properties parcels of acres and of acres purchased through her real_estate businesses the total acreage of all three parcels i sec_11 on july 20xx president contacted ind-7 of co-11 co-11 for assistance in the development of president's three properties president states we were looking at forming the dollar_figure a lot with the land from the larger lot to make a flag if the grandfathered houses were not able to be kept perhaps it would be best to make the two lots one and thereby getting to keep the existing homes president asks are my three lots possibly able to be rezoned the total acreage will be 5a co-11 was to determine if the eu houses could be identified and to keep the grandfathered houses in sort of an overlay treatment president asks about rules for a person not being able to develop more than pieces of land the larger property is not held in an llc all pieces will be held and worked with via llc and a managing agent of a corporation each final cpr unit will be held by its own llc this would this alleviate restrictions don’t you think and the commercial area is of interest to me the commercial area would be a boon to the whole project a follow up email message was sent by co-5 on september 20xx was titled tmk eu project law internal_revenue_code irc exempt_purpose sec_170 defines an educational_organization as one which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on sec_501 of the irc provides that an organization described in sec_501 is exempt from income_tax sec_501 of the code exempts from federal_income_tax corporations organized and operated exclusively for charitable educational and other purposes provided that no part of the net_earnings inure to the benefit of any private_shareholder_or_individual the term charitable includes relief of the poor and distressed sec_1 c -1 d income_tax regulations sec_501 states corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or to foster national or international amateur sports competition but only if no part of its activities involve the provision of athletic_facilities or equipment or for the prevention of cruelty to children or animals no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation except as otherwise provided in subsection h and which does not participate in or intervene in including the publishing or distributing of statements any political campaign on behalf of or in opposition to any candidate for public_office sec_1_501_a_-1 form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a rev date explanations of items name of taxpayer year penod ended tax identification_number schedule number or exhibit org the inurement prohibition provision of c is designed to prevent the siphoning of charitable receipts to insiders of the charity 165_f3d_1173 cir reasonable_compensation does not constitute inurement 276_f2d_476 cir 20xx12-20xx12 excess_benefits sec_4958 was added to the internal_revenue_code by sec_1311 of the taxpayer bill of right sec_2 p l 110_stat_1452 enacted date the sec_4958 excise_taxes generally apply to excess_benefit transactions occurring on or after date the report from the committee on ways and means on the taxpayer bill of right sec_2 h_r was submitted date h_rep_no cong 2d sess proposed_regulations were published in the federal_register date f_r the proposed_regulations were replaced by temporary regulations that were published in the federal_register date f_r the final regulations which apply as of date represent a fair and reasonable interpretation of sec_4958 based on the intent of congress as expressed in the report from the ways_and_means_committee submitted date recordkeeping sec_6001 provides that every person liable for any_tax imposed by the irc or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of carrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt from federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated_business_income_tax sec_7603 provides that for the purposes of ascertaining the correctness of any return making a return where none has been made determining the liability of any person for any internal revenue tax the secretary is authorized to examine any books papers records or other data which may be relevant to such inquiry regulations and revenue rulings exempt_purpose private benefit and inurement sec_1_501_c_3_-1 of the regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a fae ontayy name of taxpayer explanations of items tax identification_number schedule number or exhibil year period ended org more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt 20xx12-20xx12 sec_1_501_c_3_-1 of the income_tax regulations defines the term educational as the instruction or training of the individual for the purpose of improving or developing his capabilities the statute imposes no limitation on the subject matter of instruction given by a school for purposes of the exemptions see revenue rulings 1973_2_cb_71 and 1975_1_cb_335 which hold certain organizations that provide survival and field study courses respectively qualify under sec_170 however the mere fact that an organization has a training program does not of itself mean that the program qualifies as a school operated as an activity of an exempt_organization within the meaning of the term nonprofit_educational_organization see revrul_74_366 1974_2_cb_345 in national alliance v united_states f d c cir the court found that the organization was not educational while looking at other issues the court noted that the methodology test used by the service when applying the regulations tend s toward ensuring that the educational exemption be restricted to material which substantially helps a reader or listener in a learning process individual counseling has in a number of instances been held to be a tax-exempt charitable activity revrul_78_99 1978_1_cb_152 free individual and group counseling of widows revrul_76_205 1976_1_cb_154 free counseling and english instruction for immigrants revrul_73_569 1973_2_cb_179 free counseling to pregnant women revrul_70_590 1970_2_cb_116 clinic to help users of mind-altering drugs revrul_70_640 1970_2_cb_117 free marriage counseling revrul_68_71 c b career planning education through free vocational counseling and publications sold at a nominal charge overwhelmingly the counseling activities described in these rulings were provided free and the organizations were supported by contributions from the public revrul_62_6 1962_1_cb_198 holds that a nonprofit organization which was established for the training educating and rehabilitating of mentally handicapped children and which meets the prescribed requirements concerning formal instruction faculty curriculum and student body enrollment comes within the scope of the term ‘nonprofit educational organization’ however another nonprofit organization which is operated primarily as a residential facility for handicapped children does not come within the scope of the term ‘nonprofit educational_organization revrul_70_534 1970_2_cb_113 jan concerns a nonprofit organization whose primary activity is conducting travel study tours which are conducted by teachers and other personnel certified by a state board_of education normally last for several weeks the study program consists of junior college level courses related to the area being visited by the tour organized study preparation of required reports lectures instruction and recitation by the students a library of books pamphlets and material related to the courses being taught are carried on the tour examinations are administered at the end of the tour and each student is graded for the course the state board_of education allows school credit for participation in the organization’s program since the courses which are conducted by certified teachers consist of lectures instruction preparation of reports recitation examinations and the issuance of grades the organization is performing the instruction or training of the individual for the purpose of improving or developing his capabilities accordingly it is held that the organization is exempt from federal_income_tax under sec_501 of the code five to six hours per day are devoted to form 886-a department of the treasury-internal revenue service catalog number 20810w -_publish no irs gov page form 886-a rev date name of taxpayer explanations of items tax identification_number schedule number or exhibit j year period ended org revrul_76_237 1976_1_cb_330 concerns an organization whose stated purpose is to promote world-wide understanding and to improve relations between people it conducts guided tours for small groups of young people who experience different life styles and cultures in various countries and places the tours are chaperoned by instructor-counselors who teach the participants certain skills and crafts appropriate to the activities involved in their particular trip such as camping mountain climbing and kayaking in this case the organization does not qualify as an educational_organization described in sec_170 of the code since the primary function of the organization is not the presentation of formal instruction within the meaning of the regulations but rather the operation of guided tours that include social cultural and educational activities in addition the incidental instruction and training provided are so intertwined with the other activities that they cannot stand alone to function as a school operated as an activity of an exempt_organization 20xx12-20xx12 revrul_78_43 1978_1_cb_164 concerns a travel tour program operated by a university alumni association for members and their families under which the association working with various travel agencies schedules several tours annually to destinations around the world mails out promotional material accepts reservations and is paid a fee by the travel agencies on a per person basis the purpose of the association and the basis for its exemption under sec_501 of the code is the promotion of education by assisting a given university both financially and otherwise there is no formal educational program conducted in connection with these tours and they differ in no substantial way from regular commercially operated tours the association provides an employee to accompany each tour to serve as a tour leader because there is no causal relationship between this activity and the achievement of the association's exempt purposes the activity does not contribute importantly to the accomplishment of the association's purposes that are the basis for its exemption under sec_501 of the code sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities that accomplish one or more of such exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose the existence of a substantial nonexempt purpose regardless of the number or importance of exempt purposes will cause failure of the operational_test the court found that the trade_association had an underlying commercial motive that distinguished its educational program from that carried out by a university in 326_us_279 in 302_f2d_934 ct_cl the court considered the status of an organization that provided analyses of securities and industries and of the economic climate in general the organization sold subscriptions to various periodicals and services providing advice for purchases of individual securities although the court noted that education is a broad concept and assumed for the sake of argument that the organization had an educational purpose it held that the organization had a significant non-exempt commercial purpose that was not incidental to the educational purpose and was not entitled to be regarded as exempt an organization must establish that it serves a public rather than a private interest and that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private prohibited private interests include those of unrelated interests sec_1_501_c_3_-1 third parties as well as insiders 70_tc_1037 92_tc_1053 private benefits include an form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page schedule number or exhibit form 886-a rev date name oflaxpayer explanations of items tax identification_number year period ended ors advantage profit fruit privilege gain or interest 78_tc_280 a 20xx12-20xx12 in kj's fund raisers v commissioner t c memo aff'd u s app lexis 2d cir the tax_court held and the second circuit affirmed that an organization formed to raise funds for distribution to charitable causes did not qualify for exemption under sec_501 because its activities resulted in a substantial private benefit to its founders the founders of the organization were the sole owners of kj's place a lounge at which alcoholic beverages were served the founders served as officers of the organization and at times also controlled the organization’s board the that the founders exercised substantial influence over the affairs of the organization the organization’s business consisted of selling lucky or similar instant win lottery tickets to patrons of kj's place the organization derived most of its funds from its lottery ticket sales the organization solicited no public donations the lottery tickets were sold during regular business hours by the owners of the lounge and their employees from the proceeds of the sales of the lottery tickets the organization made grants to a variety of charitable organizations activity the tax_court nevertheless upheld the commissioner's denial of exemption to the organization on the ground that the organization’s operation resulted in more than incidental private benefit the tax_court held and the second circuit affirmed that a substantial purpose of kj's activities was to benefit kj’s place and its owners by attracting new patrons by way of lottery ticket sales to kj's place and by discouraging existing customers from abandoning ku's place in favor of other lounges where such tickets were available thus the organization was not operated exclusively for exempt purposes within the meaning of sec_501 although supporting charitable organizations may be a charitable court found and an organization formed to educate people in hawaii in the theory and practice of est was determined by the tax_court to a part of a franchise system which is operated for private benefit and therefore should not be recognized as exempt under sec_501 of the code 71_tc_1067 although the organization was not formally controlled by the same individuals who controlled the for-profit entity that owned the license to the est body of knowledge publications and methods the for-profit entity exerted considerable control_over the applicant’s activities by setting pricing the number and frequency of different kinds of seminars and training and providing the trainers and management personnel who are responsible to it in addition to setting price for the training the court stated that the fact that the organization's rights were dependent upon its tax-exempt status showed the likelihood that the for-profit entities were trading on that status the question for the court was not whether the payments made to the for-profit were excessive but whether the for-profit entity benefited substantially from the operation of the organization the court determined that there was a substantial private benefit because the organization was simply the instrument to subsidize the for-profit corporations and not vice versa and had no life independent of those corporations where an organization provided a source of credit to companies of which a private shareholder was either an employee or an owner the court found that a portion of the organization's net_earnings inured to the benefit of that private shareholder easter house v united_states cl_ct were made showed that the companies controlled by the private shareholder had a source of loan credit in the organization that such loans recordkeeping regulations sec_1_6001-1 in conjunction with sec_1_6001-1 provides that every organization exempt from tax under sec_501 and subject_to the tax imposed by sec_511 on its unrelated business form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page rev b86 name of taxpayer explanations of items schedule number or exhibit tax identification_number year period ended - 20xx12-20xx12 org income must keep such permanent books or accounts or records including inventories as are sufficient to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shall also keep such books_and_records as are required to substantiate the information required by sec_6033 regulations sec_1_6001-1 states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law regulations sec_1_6033-1 provides that every organization which has established its right to exemption from tax whether or not it information as may be required by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter is required to file an annual return of information shall submit such additional of the code and sec_6033 revrul_59_95 1959_1_cb_627 concerns an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status government’s position facts summary org received recognition of exemption from federal_income_tax based on its claims of scientific and educational_purposes org described its activities as researching recording and cataloging information providing consultative services and cataloging the case studies of the consultations org's primary activity is to provide for a fee consultation services though its president president out of her home_office org explains that the consultation services were educational the consultation services provided by the president include tutoring on meditative cleansing palm reading card reading mind cleansing real-estate land and business spiritual cleansing pricing for the consultation services is listed on org’s website and ranges from dollar_figure to dollar_figuredollar_figure org's president president provides services similar to those provided by org through her for-profit businesses the president explained that the services of her for-profit businesses are not provided on a tutorial basis where the services of org are org did not maintain records to document or explain the activities of the consultation services the president provided or for use in research as they were of confidential nature org's website information remained virtually unchanged from the year 20xx to the date of examination form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a rev date name of taxpayer org explanations of items schedule number or exhibit tax identification_number year period ended 20xx12-20xx12 for several years the overwhelming majority of expenses consist of direct payments to the founder and president for use of her home_office and payment of her mba expenses in 20xx org disbursed dollar_figuredollar_figure to president to purchase a real_estate rental property for her personal_use president is a professional realtor and real-estate manager org and president claim this disbursement was an unsecured loan to be repaid at a time of president's discretion by the purchase of real-estate property the disbursement was not reported on org's form_990 no promissory note was created to reflect debt to or terms and no receivables were reported to the service in 20xx president funded the purchase of vacant land attached to her rental properties president purchased this land in org’s name and the land which is managed though president’s real-estate company org and president considered this transaction president's repayment of the dollar_figuredollar_figure because the purchase_price of org's vacant land exceeded dollar_figuredollar_figure the excess was considered owed to president the amount owed to president includes commissions credited to president a promissory note was created reflecting a debt to president no interest was paid to org for_the_use_of its money as explained below org supplied no hard evidence that its primary purpose is other than to market the president's services pay for personal and business_expenses of the president and utilize org’s funds interest free to purchase rental property for her personal_use and garner commission payments on the purchase of property purportedly for org’s use issue org has more than an insubstantial part of its activities not furthering exempt purposes a substantial part of its activities further a commercial purpose sec_501 provides for the exemption from federal_income_tax of organizations organized and operated exclusively for educational_purposes an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose see sec_1 c - c the primary beneficiary here is president this is evidenced by the fact that president created and controls org and org's primary activity is the promotion and sale of president’s individual counseling services counseling services that mirror her own and other for-profit businesses the purpose of org's activities differs substantially from those of the organizations in revrul_78_99 1978_1_cb_152 revrul_76_205 1976_1_cb_154 revrul_73_569 1973_2_cb_179 revrul_70_590 1970_2_cb_116 revrul_70_640 1970_2_cb_117 revrul_68_71 c b dollar_figure overwhelmingly the counseling activities described in these rulings were provided free and the organizations were supported by contributions from the public org is unlike the organization in revrul_62_6 1962_1_cb_198 in that there are no requirements concerning formal instruction faculty curriculum and student body enrollment within the scope of the term non-profit educational_organization org is similar to the organization described in revrul_78_43 1978_1_cb_164 where there is no formal educational program conducted in connection with the consulting services org’s website lists the counseling services offered and the price for each no mention is made of a waiver of fees for persons who are unable to afford the services of org scientific research form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a rev date explanations of items schedule number or exhibit name of taxpayer tax identification_number year period ended org by its own admission org has done virtually no scientific research 20xx12-20xx12 education and recordation org's counseling services were amorphous e e e no instructional material was provided by org no structured classes or curriculum or regular enrolled student body existed no evidence of the content or skills taught org provided no convincing proof that meaningful and intentional education transpired for the purpose of learning the skills used by org's president in her for profit businesses the service is unconvinced that org s primary motive was intentional education of the public org's application_for recognition of exemption were based on its claims of educational and scientific org claimed its activities were researching recording and cataloaing its research to provide consultative services and the recording and cataloging of the consultative services case studies yet org provided no significant evidence that it had accomplished any actual research or recordation the organization failed to maintain records of e e e e e who was tutored what was taught when activities took place what activities took place or the results of activities org explained that documentation of sessions was not done because the issues discussed were private and personal matters of the individuals not only does this position provide zero substantiation of an exempt activity but entirely precludes the research and recordation purpose repeatedly claimed on org’s application_for recognition of exemption website org claimed an on-going health education program will be available to the general_public through the internet the health care program was to feature self care utilizing communication with the subconscious meditation and herbal therapy however org’s website offers little more than general information and an indiscernible amount of educational material virtually no updates research or education were added to the website for at least years by 20xx the website had updates even these are vague and general statements that eating blueberries honey bottle palms and yellow hibiscus in the yard are good and significant its research page remained relatively unaffected from 20xx through 20xx with multiple references to org's research yet no actual research was posted or explained no reference is made to any studies or research conducted by org while the educational information has been vague and general the sale of the president’s counseling services have been clearly and consistently delineated and remained the predominate feature of the website the services as listed on org's website match the services noted on multiple receipts deposited in her personal business accounts form_990 claims unsupported form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a rev date explanations of items schedule number or exhibit name of taxpayer tax identification_number year period ended org org's activities claimed on its federal returns were unsupported by documentation org claimed to have engaged in educational outreach activity in a variety of forms to hundreds of individuals much of the activity alleged had not actually taken place org included in the number of people it claimed it helped people who were associated with or merely mentioned by the client during the counseling session and people who attended classes presented by a separate organization co-2 this vastly inflated the number of people org assisted 20xx12-20xx12 the service does not dispute that org participated in dr ’s study yet the study was in assisting in dr ’s study org’s primary documented activity was where she supplied instructions for making tea with a picture of a shrimp and lemon on the tea label and submitted her own blood pressure readings completed by dr a minimal amount org’s activity was verified and this activity contained no research that this level of participation in dr ’s study would comprise education is dubious but clearly does not rise to the level of education needed to substantiate recognition under sec_501 as an educational_organization commercial motive as with american institute for economic research v united_states org had a significant non-exempt purpose that was not incidental to the educational purpose the organization's activities compete with for-profit organizations org operates in a manner indistinguishable from other commercial enterprises available to the public that also for a fee teach tarot card and palm reading spiritual and mental aids and spiritual healing sessions similarly many for-profit enterprises offer to the public methods to assist and improve real-estate purchases and business management included are those of her associates and co-4 in which president herself is listed as a presenter in the products for sale org’s primary goal is to maximize the fees from the president’s services sold by org the subject matters real-estate sales and management palm reading card reading and meditative counseling of president’s consultation services provided through org duplicate those she provides through her for-profit businesses the services are so intertwined that it is improbable to claim without careful contemporaneous recordkeeping that the for-profit services offered by the president are distinct from the same exempt_purpose services offered by president through org’s tutoring services the counseling services for all president’s businesses are run out of the same home_office for which org pays president for_the_use_of this intermingling of services is compounded by multiple receipts made out not to org but solely to president conversely her receipts for her for-profit are for services named exactly as those on org's website and at least one receipt made out to org was deposited into president’s personal business account the arrangement provides an obvious opportunity for abuse of the claimed tax-exempt status and org has clearly not shown that abuse of the exemption is absent org has a substantial non exempt_purpose of selling the president's services thereby providing business to the president issues org has not established that it operates to serve public interests but rather service the private purposes of its president president org’s net_earnings have inured to its president president as with better business bureau of washinaton d c inc org has an underlying commercial motive based on the president’s benefit to her for-profit businesses form 886-a pepartment of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a rev date name of taxpayer org explanations of items schedule number or exhibil tax identification_number year period ended 20xx12-20xx12 alliances are built with the clients that include real-estate developers and real-estate construction companies to assure future business for the benefit of the president’s for profit tarot card and palm reading and real-estate management businesses this is illustrated by one real-estate developer’s co-8’s payments for tutoring that constitute of org’s total receipts for 20xx the same real-estate developer has paid dollar_figure per year from 19xx to 20xx and dollar_figure per year from 20xx to 20xx representing over of org receipts since org’s inception to 20xx inurement is prohibited by the code in general this is the unjust payment of money as in the case of disbursements of org's funds to the president for her personal gain and the absence of compensation_for her use of org's funds the use of org’s funds provided president with a deposit allowing her to purchase residential real-estate she unlikely could have otherwise have obtained the repayment to org was made in the form of real-estate that increases the value of the president’s connected real-estate properties thereby benefiting the president president also profited from the commission charged to org on her purchase of org's property and non payment of interest for use of org’s funds disbursement president had use of dollar_figure of org’s funds from october 20xx through august 20xx org claims this was an unsecured personal loan to president the amount disbursed to president represents a substantial amount of org’s assets and activities for 20xx the amount disbursed is of org’s total beginning year assets of 20xx of year end assets over three times its annual revenue and over times its annual expenditures the parties established no terms for the unsecured loan other than the agreement for president to purchase real-estate for org at an unspecified date no interest was charaed for_the_use_of org's funds no security or collateral provided no fixed maturity_date established no demand for repayment made and neither the 20xx year nor 20xx federal tax_return reflected a loan or receivable of any type the value of interest on the use of org's funds was not reported as income on either form_w-2 or to the president both the loan the unpaid interest on the loan constitute inurement in contravention of sec_501 on form_990 part ill line 2b org claimed that org did not lend money or extend credit to officers yet president is both a founder and officer received a disbursement described to the service as a loan org neglected to reflect any receivable on its balance_sheet and claimed it owned assets of dollar_figuredollar_figure where it was actually president who owned the residential_rental_property purchased for her personal_use and profit only after examination inquiries by the service did org amend its return to reflect the disbursement of dollar_figuredollar_figure funds to president the loan was recorded in the amended joint purchase and nominee agreement this manner of documentation of the disbursement of over half of org’s funds appeared informal in contrast to the documentation in standard promissory note created to show debt to president of lesser amount the beneficiary of the land purchase is president as an enhancement of her real-estate development with her adjacent rental properties the purchase does not support that this arrangement held org’s exempt_purpose paramount to president’s personal profit motives the land i sec_1 virtually surrounded by the form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page fon bba oe explanations of items schedule number or exhibit year period ended tax identification_number name of taxpayer org president's residential rental properties unimproved residential and managed by one of president’s real_estate companies 20xx12-20xx12 __ no facts support that the intended use is agricultural research for org’s benefit to the contrary president’s intent to utilize org’s vacant land for her personal profit is further evidenced by the email president sent to another real-estate developer in this president refers to org’s vacant land as her property with the intent to combine it with her rental properties to create a housing and commercial development the service is unconvinced that as claimed by org at no time was such a transaction under consideration the statements in the report stating otherwise are false see org’s comments below the service's intention is not to misconstrue president’s words however to read president's actual words written to a developer particularly in combination with the facts surrounding the connected land purchases and president’s multiple for-profit real-estate activities and as touted on co-2 website that she is the principle broker for her real_estate company and is involved in sales and property management does not allow for the service to turn away from a reasonable conclusion based on the facts and circumstances at hand of additional concern is the calculation of repayment where president is credited with amounts in the form of realtor commission credit of dollar_figuredollar_figure that she did not pay yet was added as an amount that org now owes to president this effectively allowed president to purchase the land with org’s funds while she develops controls and financially benefits from the land while creating sales commission income for herself on the purchase expenses the overwhelming majority of expenses were not applied to educational and scientific purposes or for public benefit but were in fact paid directly to the president for use of her home_office and her educational expenses to obtain her personal mba tuition for the years 20xx through 20xx org ‘s forms reported a total of dollar_figure for her education and dollar_figure for her home_office the total paid for president's education and occupancy for these years is dollar_figure while the total of all expenses is dollar_figure based on forms the percentage of expenses spent on president's occupancy and mba tuition is dollar_figure for 20xx dollar_figure for 20xx for 20xx and the pattern of spending shows remaining percentage of expenses is miniscule for 20xx is for 20xx for 20xx for 20xx the percentage paid to president dropped to dollar_figure and dollar_figure was spent on other activities this anomaly in spending on other than president was only because of the large and unusual legal expense which was unexplained the percentage spent on unexplained legal fees for 20xx is it is impossible to assign an exempt_purpose to the unexplained expenses president's home_office was also used to produce income from her home businesses thereby supplementing her personal business_expenses and increasing her business income profit although a mba in business may be beneficial to president org has not shown that the education expenses were needed or reasonable in fact president's pursuit of education in business administration was established prior to application_for recognition of exemption this supports that president intended to pay for her educational expenses prior to formation of org the post approval of the expenses supports form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page schedule number or exhibit for bbo oo explanations of items name of taxpayer tax identification_number a year period ended org that president and not board determination controlled whether president's educational expenses were paid_by org 20xx12-20xx12 president's control the organization's board was initially comprised solely of president's family members because this was challenged by the service during the application process org changed the board to a small_group of founders on its application to the service then simply added the family members back on the board the control has remained predominately with its president and treasurer president there appears to be little or no oversight from the board_of president's actions and internal controls are entirely absent the board regularly gave post approval of expenditures although the board approved amounts for educational expenses org now claims it was for occupancy and furniture approval was even given in excess of payments actually made providing clear evidence that no oversight or accountability of disbursements was required of president for spending org's monies assuming the deposit of dollar_figuredollar_figure into co-9’s bank account was president's money she was issued dollar_figuredollar_figure of org’s money when the co-9 bank account was closed although a small amount it represents another illustration in a pattern of president's casual and unfettered control_over org's funds to herself devoid of any accountability the payments were made out directly to president all checks issued from org were signed by president including those made out to president and those made out to cash for example the dollar_figuredollar_figure paid to cash in 20xx there is a quantitative meaning to the term ‘incidental’ private benefit if the organization's activity provides a substantial benefit to private interests even indirectly it will negate charitability and exemption under sec_501 the substantiality of the private benefit conferred by the activity in org’s situation there is evidence of clear and intentional substantial benefit to the private interests of those involved with the management and sale of real-estate services and other spiritualist counseling services such as those offered by the president this is further supported by the lack of structured intentional education and of educational materials and services provided to the public is measured in the context of the overall public benefit while the large distribution of org’s funds occurred from 20xx though 20xx described by org as a loan to president a consistent pattern was established since 20xx where president has not only benefited from the non-payment of taxes on her counseling receipts but also from unfettered and tax free distributions of org’s profits to herself issue org did not maintained adequate_records as provided by sec_6001 org's application touted that president president had completed graduate work in business administration and that dir-4 director had knowledge of the legal financial and bookkeeping requirements for a tax exempt_organization as well as a strong business background yet org maintained virtually no recordkeeping and claims made on its federal return were not proven org maintained no records to substantiation its exempt_activities org did not establish that the sessions for land facility were isolated from org director's real-estate broker and company management skills nor did it establish what education occurred during the other tutoring sessions on palm reading card reading and meditative techniques nor that org's services differed from those of the presidents for-profit services org has not met the reporting requirements in accordance with provisions of the irc and regulations under sec_6001 and to the retention of records sufficient to determine whether the entity is operated for the purposes for which it was granted tax-exempt status eo has failed to establish that it was operated for purposes exempt under sec_501 form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page form 886-a rev date explanations of items schedule number or exhibit name of taxpayer tax identification_number year period ended org 20xx12-20xx12 _ further in response to the services requests under sec_7603 for records to explain unprecedented legal expense that represent dollar_figure of total expenses and dollar_figure of total revenue org was unwilling to provide the explanation on the grounds of confidentiality org’s claims that reasons or records of the large and unusual legal expenses of 20xx were confidential information provided the service with no confidence that the legal expenses were appropriately recorded as expenses of org this is particularly true in light of org’s blatant pattern of payments to the president that constitutes inurement as explained above taxpayer’s position the taxpayer has signed form_6018 consent to propose action - sec_7428 agreeing with the government's proposition of revocation of exemption effective january 20xx see attachment although the taxpayer agreed with the revocation the taxpayer also provided comments regarding statements made in the rar draft previously issued by the service the comments are included as attachment please see attachment for a copy of the taxpayer's letter dated may 20xx note the following was noted in this section in the draft rar previously issued to org in a letter to the service regarding the disbursement to president and a revenue_agent report regarding president's income_tax returns org explained the following org explained the real_estate was located by president for org however the sellers would not sell unless someone bought the adjacent parcel dollar_figure acres and this was to be done by president president agreed to loan dollar_figuredollar_figure to org unsecured interest free and due in five years this intent was memorialized on june 20xx because of abandoned automobiles on org's property the sale of org’s parcel could not proceed rather than cancel the contract the seller requested the transactions to be separated president expected the purchase of president's property to close soon days after as a matter of convenience the board_of directors agreed for president to use org’s funds on the condition that president would provide all of the funds to close org’s later purchase on october 20xx org deposited dollar_figuredollar_figure in escrow bringing org's deposits to dollar_figuredollar_figure as of october 20xx president was able to close the purchase of her parcel without the use of org funds and provide the remaining funds for org’s parcel org’s directors did not understand the transactions to be a problem since economically org would be better off in that the loan interest free loan to president was short term and the anticipated interest free loan from president was for five years the issues with org’s parcel were not resolved within a short time on august 20xx danapoint was formed august org purchased property w president proving all of the funds august 20xx co-9 acknowledged its liability to president with a promissory note due august 20xx may 20xx org ratified the transaction and the borrowing from president org also explained that had org’s directors sought counsel on the transactions the loan to president would not have been made if it had been made interest would have been charged and a second mortgage would have been secured the transactions do not appear to involve inurement further the transactions do not seem to fall within the ambient of the excess_benefit_transaction rules president was given a short term_interest free loan on dollar_figuredollar_figure on which was repaid within nine months in exchange for a five year interest free loan on dollar_figuredollar_figure to be an excess_benefit_transaction the benefit provided to the disqualified_person must exceed the value of consideration received such is not the case with the transactions described above form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page schedule number or exhibit form 886-a rev date name of taxpayer explanations of items tax identification_number year period ended org now that org has the funds to pay off the amount owned to ind-8 the board ts capable of paying the loan in full and will do so upon the service's request 20xx12-20xx12 org included excerpts of a revenue_agent report rar issued february 20xx from a service employee service emp revenue_agent and comments related to the rar org stated the rar contains misleading and inaccurate statements that should be corrected e e e e where the rar states the examiner asked president how she was able to purchase a property worth dollar_figure with the income reflected on her tax returns she said the mortgage on the property was a stated income non-qualifying loan she said she used money from her personal savings and borrowed money from her non-profit organization org oo org clarified that president does not own org and is one of three directors and president's commitment to loan funds to org and that the sale was held up due to clean up issues should have been addressed where the rar states near the end of the closing date the seller informed president that the clean up required additional time the sale went ahead because president wanted to expedite the sale the parcels were to be purchased separately oo org clarifies that it was in fact the seller who wanted to close the sale separately the rar states president explained org s practice of and the land was acquired to restore it to its natural state restore the fish ponds and plant is the restoration of the earth oo org clarifies that the purpose of the land is educational and meditative research and president is not the director of org but is one of three the rar states the purpose of org purchase of the land is educational and scientific however in a letter dated 20xx to ind-7 of co-11 she discussed combining the vacant land lot with her dollar_figure acre lot with org’ sec_1 acre lot to make a flag shaped lot possibility of combining her three lots and rezoning as r-5 in the letter she discusses the the report states that by hiring emp-7 to discuss the available options regarding zoning issues and easement issues president somehow intended to combine the properties at no time was such a transaction under consideration the statements in the report stating otherwise are false beyond this position the taxpayer is being presented with these issues for the first time the irs is awaiting the taxpayer response conclusion org does not qualify for exemption under sec_50l c because it failed to establish that it was organized and operated exclusively to achieve a purpose that is described under that code section its net form 886-a department of the treasury-internal revenue service catalog number 20810w _publish no irs gov page _27 form 886-a ron date explanations of items name of taxpayer tax identification_number schedule number or exhibit year penod ended org 20xx12-20xx12 earnings inured to the benefit of private individuals and that more than an insubstantial part of its activities furthered private purposes rather than purposes described in sec_501 org’s president provides a service purportedly in the form of a spiritual educational counseling to individuals on subjects ranging from reading tarot card and palms to assistance in business and real-estate matters without documentation of the content or structured educational curriculum org offers its services at a cost to interested clients without regard to the clients’ income levels or need sec_170 defines an educational_organization as one which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on org does not meet this definition org was unable to demonstrate the claims it made on its application_for exemption org has not established that its primary benefits are to the public in fact all substantiated activities show the primary benefit is intended toward the president who provides her services for a fee while receiving payment for use of her home business office for her personal education and for purchasing real_estate for her personal_use while benefiting from sales commissions on transactions she orchestrates that benefit her financially org operates in a manner indistinguishable from commercial enterprises available to the public accordingly it is determined that org is not an organization described in sec_501 and is not exempt from income_tax under sec_501 effective january 20xx it is the irs's position that the organization failed to meet the reporting requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under sec_501 for the foregoing reasons revocation of exempt status is proposed because the facts show that for years 20xx and 20xx org operated in a manner materially different from that represented in its form_1023 application the government proposes that the revocation be effective retroactively to january 20xx form_1120 returns should be filed for the tax periods ending on or after january 20xx form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page