Determination 201040037: IRS revokes a social club's tax exemption

Plain-English summary

The IRS revoked a social club's federal income tax exemption under IRC § 501(c)(7), effective 10/1/XX. The determination says the club had closed, had no books and records available for examination, and no longer had members meeting, collecting dues, or conducting activities. The state had administratively dissolved the corporation and filed a lien against it, and the vice president agreed to the revocation by signing Form 6018-A. The organization was required to file Form 1120 for the year ended September 30, 20XX and for future periods.

Ruling snapshot

• Question: Did the organization continue to qualify for exemption under IRC § 501(c)(7)?
• Outcome: Revocation
• Key authorities: IRC § 501(c)(7)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE

Attn: Mandatory Review, MC 4920 DAL

1100 Commerce St.

TAX EXEMPT AND Dallas, TX 75242
GOVERNMENT ENTITIES 501.07-00
DIVISION

Date: July 6, 2010

Number: 201040037
Release Date: 10/8/2010

LEGEND

ORG = Organization name Employer Identification Number:

XX = Date Address = address Person to Contact/ID Number:
Contact Numbers:

ORG Voice

ADDRESS Fax

CERTIFIED MAIL — RETURN RECEIPT REQUESTED
Dear

In a determination letter dated June 19XX, you were held to be exempt from Federal income tax under section 501(c)(7) of the Internal Revenue Code (the Code).

Based on recent information received, we have determined you have not operated in accordance with the provisions of section 501(c)(7) of the Code. Accordingly, your exemption from Federal income tax is revoked effective 10/1/XX. This is a final adverse determination letter with regard to your status under section 501(c)(7) of the Code.

We previously provided you a report of examination explaining why we believe revocation of your exempt status is necessary. At that time, we informed you of your right to contact the Taxpayer Advocate, as well as your appeal rights. On 1/23/XX, you signed Form 6018-A, Consent to Proposed Action, agreeing to the revocation of your exempt status under section 501(c)(7) of the Code.

You are therefore required to file Form 1120, U.S. Corporation Income Tax Return, for the year ended September 30, 20XX with the Ogden Service Center. For future periods, you are required to file Form 1120 with the appropriate service center indicated in the instructions for the return.

-2-

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 contact the person whose name and telephone number are shown at the beginning of this letter.

Sincerely,

Nanette M. Downing
Director, EO Examinations

Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or Explanation of Items Exhibit Name of Taxpayer EIN: Year/Period Ended ORG 20XX09

LEGEND
ORG = Organization name XX = Date City = city State = state President = president VP = Vice President Motto = motto

ISSUE — REVOCATION

The original assigned agent closed this case with a proposed inadequate records as there were no books and records to examine. The club closed in 20XX, and was closed at the time of the initial examination. The company that was contracted by the City of CITY, which owns the MOTTO building, was no longer doing business with the city, and the tax return preparer had retired and was answering no questions.

The case was returned by review with the advise to revoke the organization. After more research it was determined that the City of CITY had contracted the facility out to a new vendor who was going to run an upscale for profit restaurant and fitness center. The State of STATE had administratively dissolved the corporation, and had a lien filed against the organization. The actual membership of the MOTTO was dispersed, no longer met, collected dues, or had any activities. The president is currently in a nursing home in CITY, and the Vice President, VP agreed that the county club's 501(c)(7) exemption should be revoked, and signed a Form 6018. A Form 872, Statute extension was also requested, which she also agreed to, but it never has been received.

Form 886-A(rev.4-68) Department of the Treasury - Internal Revenue Service

Page: -1-