The Law of Tax-Exempt Healthcare Organizations 2017 Cumulative Supplement, Fourth Edition + website

CHAPTER TWENTY‐FOURTax Treatment of Unrelated Business Activities

1. § 24.2 Definition of Trade or Business
   1. *(a) General Principles
   2. *(b) Profit Motivation Requirement
   3. *(f) Concept of Investment Plus
2. § 24.3 Definition of Regularly Carried On
   1. (a) General Principles
   2. *(c) Fundraising Activities
3. § 24.12 Laboratory Testing Services
4. § 24.18 Other Exceptions to Unrelated Income Taxation
   1. (a) Exceptions for Activities
   2. (b) Exceptions for Income
5. § 24.20 Revenue from Controlled Organizations
   1. (b) Special Rule
6. *§ 24.23 Computation of Unrelated Business Taxable Income

§ 24.2 DEFINITION OF TRADE OR BUSINESS

*(a) General Principles

p. 581, carryover paragraph. Insert as last sentence:

The IRS ruled that income to be received by a private foundation on satisfaction of debts of legal fees earned by its founder, now deceased, will not be unrelated business income because the foundation will only be a passive recipient of the income; the unrelated business that was regularly carried on to generate the fees was conducted by the founder's law firm, not the foundation.^38.1

*(b) Profit Motivation Requirement

*p. 582, first paragraph. Insert footnote at end of last line:

1. 49.1. This matter of the requirement of a profit motive in the exempt organizations context closely parallels the law distinguishing bona fide businesses from hobbies (“hobby loss” rules (IRC § 183). Not all courts agree with the IRS's interpretation of these rules, however; an appellate court characterized the approach as ...