Court Opinion

ID: 2801558
Source: CourtListenerOpinion
Date Created: 2015-05-18 20:01:25.996569+00
Date Added: 2024-06-11T11:35:52.896521
License: Public Domain

FILED
                           NOT FOR PUBLICATION                              MAY 18 2015

                                                                         MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                        U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

ZAGFLY, INC.,                                    No. 13-71566

              Petitioner - Appellant,            Tax Ct. No. 1494-12X

       v.
                                                 MEMORANDUM*
COMMISSIONER OF INTERNAL
REVENUE,

              Respondent - Appellee.

                           Appeal from a Decision of the
                                    Tax Court

                        Argued and Submitted May 6, 2015
                              Pasadena, California

Before: FISHER, BEA and FRIEDLAND, Circuit Judges.

      Zagfly, Inc., appeals the Tax Court’s denial of its petition for a declaration

of tax-exempt status under I.R.C. § 501(c)(3). Reviewing the Tax Court’s

nonexemption determination de novo and its underlying factual findings for clear

error, see Johanson v. Comm’r, 541 F.3d 973, 976 (9th Cir. 2008), we affirm.

        *
        This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      The Tax Court correctly applied the “operational test” under Treasury

Regulation § 1.501(c)(3)-1(c)(1), determining Zagfly would not be “operated

exclusively for one or more exempt purposes.” It based this conclusion on the

factual finding that Zagfly would not be engaged primarily in activities which

accomplish one or more of the exempt purposes specified in section 501(c)(3) of

the tax code. Based on its filings with the Internal Revenue Service (IRS),

Zagfly’s main activity would be to operate a website through which its customers

could purchase flowers at market prices. After establishing the flower website’s

viability, Zagfly would expand to market other goods and services. Although

Zagfly planned to donate its business profits to charitable organizations, the Tax

Court did not err in concluding the donation of business profits was not an exempt

purpose. See Riker v. Comm’r, 244 F.2d 220, 227-28 (9th Cir. 1957).1

      AFFIRMED.

      1
        Because we affirm the Tax Court’s nonexemption determination under
Treasury Regulation § 1.501(c)(3)-1(c)(1), we decline to address the court’s
“unrelated trade or business” analysis under § l.50l(c)(3)-l(e)(l) and the
Commissioner’s alternative argument that Zagfly would not qualify for exemption
because it would be a “feeder organization.”

                                          2