CHAPTER SEVENTEENPolitical Organizations

Until 1974, there were no rules as to whether political campaign committees and similar organizations were appropriate subjects of taxation. This absence of tax exposure resulted from the belief that virtually all of the receipts of political organizations were in the form of gifts and that, consequently, these organizations would not have taxable income.1

For many years, the IRS either failed or refused to assert tax liability against political campaign committees.2 In 1974, however, the IRS ruled that an unincorporated campaign committee was not exempt from federal income taxation and must file tax returns, showing, as elements of gross income, items such as interest, dividends, and net gains from the sale of securities and related deductions (although contributions to the organization remained nontaxable).3 This ruling was superseded by the enactment in 1974 of a tax law provision on the point4 and related rules (including a per donee gift tax exclusion).5

Nonetheless, even after its 1974 ruling, the IRS continued to uphold the per donee gift tax exclusion for separate ...

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