Organizational and Operational Tests

Internal Revenue Service
Appeals Office
Department of the Treasury
Date: llEC 10 2015
Employer Identification Number:
Person to Contact:
Employee ID Number:
Number: 201610026
Release Date: 3/4/2016
Tel
Fax:
ORG
UIL: 501.03-30
Certified Mail
Dear
This is a final adverse determination regarding your exempt status under section 501 (c)(3) of the Internal Revenue Code (the "Code"). It is determined that you do not qualify as exempt from Federal income tax under section 501 (c)(3) of the Code: effective January 1, 2009.
Our revocation was made for the following reasons:
You have not operated exclusively for one or more exempt purposes as required to be an organization described section 501 (c)(3) of the Code. You operated in substantial part to provide tax benefits and assistance to private individuals by accepting donations of real estate with high stated appraised values. You re-sold the properties for less than one percent of the stated appraised value to other private individuals, without obtaining any independent appraisals of the property. While you have conducted activities that clearly further charitable purposes, your repeated conduct of the real estate sales activities impermissible accommodating private interests described above warrants the conclusion that you operated for a substantial purpose of benefitting private interests in contravention of the requirements for an organization to be described in section 501(c)(3}, as set forth in Treas. Reg. § 1.501 (c)(3)-1 (d)(1 )(ii).
Contributions to your organization are not deductible under section 170 of the Code.
You are required to file Federal income tax returns on Forms 1120. File your return with the appropriate Internal Revenue Service Center per the instructions of the return. For further instructions, forms, and information please visit www.irs.gov.
If you were a private foundation as of the effective date of the adverse determination, you are considered to be taxable private foundation until you terminate your private foundation status under section 507 of the Code. In addition to your income tax return, you must also continue to file Form 990-PF by the 15th Day of the fifth month after the end of your annual accounting period.
Processing of income tax returns and assessments of any taxes due will not be delayed should a petition for declaratory judgment be filed under section 7428 of the Code.
We will make this letter and the proposed adverse determination letter available for public inspection under Code section 6110 after deleting certain identifying information. We have provided to you, in a separate mailing, Notice 437, Notice of Intention to Disclose. Please review the Notice 437 and the documents attached that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in Notice 437.
If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of section 7428 of the Code in one of the following three venues: 1) United States Tax Court,
2) the United States Court of Federal Claims, or 3) the United States District Court for the District of Columbia. A petition or complaint in one of these three courts must be filed within 90 days from the date this determination letter was mailed to you. Please contact the clerk of the appropriate court for rules for filing petitions for declaratory judgment. To secure a petition form from the United States Tax Court, write to the United States Tax Court, 400 Second Street, N.W., Washington, D.C. 20217. See also Publication 892.
You also 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 matters that may not have been resolved through normal channels get prompt and proper handling. If you want Taxpayer Advocate assistance, please contact the Taxpayer Advocate for the IRS office that issued this letter. You may call toll-free, 1-877-777-4778, for the Taxpayer Advocate or visit www.irs.gov/advocate for more information.
If you have any questions, please contact the person whose name and telephone number are shown in the heading of this letter.
Sincerely Yours,
Appeals Team Manager cc
Enclosure: Publication 892
Internal Revenue Service
Tax Exempt and Government Entities Division Exempt Organizations: Examinations 11 00 Commerce Street, MC 4980 DAL Dallas, TX 75242
ORG
Certified Mail - Return Receipt Requested Dear Why you are receiving this letter
Department of the Treasury
Date:
June 19, 2014
Taxpayer Identification Number:
Form:
Tax Year(s) Ended:
Person to Contact/ID Number:
Contact Numbers:
Telephone:
Fax:
Manager's name/ID number:
Manager's contact number:
Response-ttue date:
We propose to revoke your status as an organization described in section 501 (c)(3) of the Internal Revenue Code (Code). Enclosed is our report of examination explaining the proposed action.
What you need to do if you agree
If you agree with our proposal, please sign the enclosed Form 6018, Consent to Proposed Action- Section 7428, and return it to the contact person at the address listed above (unless you have already provided us a signed Form 6018). We'll issue a final revocation letter determining that you aren't an organization described in section 501(c)(3).
After we issue the final revocation letter, we'll announce that your organization is no longer eligible for contributions deductible under section 170 of the Code.
If we don't hear from you
If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final revocation letter. Failing to respond to this proposal will adversely impact your legal standing to seek a declaratory judgment because you failed to exhaust your administrative remedies.
Letter 3618 (Rev. 6-2012)
Effect of revocation status
If you receive a final revocation letter, you'll be required to file federal income tax returns for the tax year(s) shown above as well as for subsequent tax years.
What you need to do if you disagree with the proposed revocation If you disagree with our proposed revocation, you may request a meeting or telephone conference with the supervisor of the IRS contact identified in the heading of this letter. You also may file a protest with the IRS Appeals office by submitting a written request to the contact person at the address listed above within 30 calendar days from the date of this letter.
The Appeals office is independent of the Exempt Organizations division and resolves most disputes informally.
For your protest to be valid, it must contain certain specific information including a statement of the facts, the applicable law, and arguments in support of your position. For specific information needed for a valid protest, please refer to page one of the enclosed Publication 892, How to Appeal an IRS Decision on Tax-Exempt Status, and page six of the enclosed Publication 3498, The Examination Process. Publication 3498 also includes information on your rights as a taxpayer and the IRS collection process. Please note that Fast Track Mediation referred to in Publication 3498 generally doesn't apply after we issue this letter.
You also may request that we refer this matter for technical advice as explained in Publication
892. Please contact the individual identified on the first page of this letter if you are considering requesting technical advice. If we issue a determination letter to you based on a technical adYi~ me_morandum issu_ed by_the_ExemptQrganizations Rulings and Agreements office, no further IRS administrative appeal will be available to you.
Contacting the Taxpayer Advocate Office is a taxpayer right You have the right to contact the office of the Taxpayer Advocate. Their assistance isn't a substitute for established IRS procedures, such as the formal appeals process. The Taxpayer Advocate can't reverse a legally correct tax determination or extend the time you have (fixed by law) to file a petition in a United States court. They can, however, see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling. You may call toll-free 1-877-777-4778 and ask for Taxpayer Advocate assistance. If you prefer, you may contact your local Taxpayer Advocate at:
Internal Revenue Service
Office of the Taxpayer Advocate
For additional information
If you have any questions, please call the contact person at the telephone number shown in the heading of this letter. If you write, please provide a telephone number and the most convenient time to call if we need to contact you.
2 Letter 3618 (Rev. 6-2012)
Thank you for your cooperation.
Enclosures:
Report of Examination
Form 6018
Publication 892
Publication 3498
Sincerely,
For Mary A. Epps
Acting Director, EO Examinations
Letter 3618 (Rev. 6-2012)
3
Fonn886·A
~ev. Janua~1994)

# ISSUE

EXPLANATIONS OF ITEMS
Is operating exclusively for charitable and educational purposes under Section 501{c)(3) of the Internal Revenue Code (IRC)?

# FACTS

Form 102~
_ filed Form 1023, Application for Recognition of Exemption, on March 29, 20t • Based upon this filing, Internal Revenue Service granted exempt status under IRC section 601(c)(3) to on May6, 20 • Part N of the Form 1023 provided narrative a description of activltfes as follows:
•nte mission of the Is to assist underprivileged school children to realize their educational goals through the direct donation of essential materials such as pencils. The activities wiff be conducted by uncompensated volunteers, at least annually. 1he primary focus of these actlvftfes will be the rural areas of . This actJvfty is in furtherance of the charitable support of education; it wlll occupy H--~ of the - --~-time.-'l'fle- - ·will seelc broad based pubic support from individuals in Hs home base of. • Part VIII of the Form 1023 stated that grants.
T!Y§! would eollcll funds from individuals and fOlft"'datlon The . A Charitable Trust, was signed on December 12. 20 . General charitable operaUonal procedures were provided in 1he Trust, and no apecffio charitable purpose of was provided in the Trust Cwmnt AQIMtfes OU.fil:ls.!~~- examination of during the exam year. · o Shipping school supplies to delivered uniforms. shoes, school supplies, and tuHion to school children In during the years of examination. For the year examined, total value of delivered goods was $$$. o Facilitation of property donations and transfers.
Fonn888-A
EXPLANATIONS OF ITEMS
(Rev. Januaty 1994)
Tax lden1lficallon Number properties that were transferred between lndMduals and The examination identified during the years of examination. and are listed below by property tax The properties were located in different counties of parcel number.
•
County, -Parcel#
•
County, -Parcel#
•
County,· -Parcel#
Quitclaim Deeds and Forms 8283 for the properties are summarized below:
Countv Pmperty Parget;
Quitclaim Deeds provided bY 1he organizatk?n revealed:
-- n--- --- Quitclaim Deed executed on December 22, 20 +oy--- .
{Grantee). - by an o1floer of
• Fonn 8283, signed on December 28, 20 appraised value of $
• Quitclaim Deed executed on December 28, 20 by (Grantee).
Form 8283, signed on December 28,· 20 by an officer of
• appra~ value of$
• Quitcf~im Deed executed on December 29. 20 by (Grantor} to . , listing a property (Grantor) to , Bstlng a property (Grantor) to (Grantee). ; as the consideration.
1 paid by reoetved $
The Deed also provided that
Quftdalm· Deed-executed-on December SO; 20 by
• by an officer of
Form 8283, signed on December 30, 20
• appraised vaJue of $
2 by
• Quitclaim Deed executed on February 15, 20 (Grantee). , listing a property (Grantor) to {Grantee).
I a.s me consideration. paid by
The Deed also provided that received $ 1 The Information was obtained from related IRS audH.
2 The QultOiafm Deeds were voluntarily provided to IRS during the examination.
Focm886-A
(Rev. Januaty1994)
EXPLANATIONS OF ITEMS
Name of lalcpeyer
The-flowchart below Is based on the Quitclaim Deed$, Forms 6283, IRS Internal records, and county property recoros.
County ProPerty Parcel:
Quitclafm Deeds provided by the organization revealed:
• Quitclaim Deed executed on May 26. 20 2 by {Grantee).
• Fonn 8283, signed on May 26, 20· s by an officer of valueof$' • (Grantor) to
• listing a property appraised
• Quitclaim Deed executed on December 10t 20· by (Grantor) to (Grantee}. The Deed also provided that the Grantor r&Oeived $ , paid by . for the consideration.
-ro. flowQhart below is ~ oo ~
Quitclaim. Oeed$, FQI'Ol$ ~.
IRS lntenl$1 reooo;j&. and county property re®rds.
3 The Form 8283 was voluntarily proVIded to IRS during the examination.
R>nu886-A
EXPLANATIONS OF ITEMS
(ReV. January 1994)
County Property Parcel:
Quitclaim Deeds provided by the OllJ&nlzation revealed: by Qultofaim Deed executed on December 27, 2G • Ye«/Period ended (Gra~) to_ --~~------ --- ------ --- (Grantee). . .. - , Osting a property by an officer of
• Form 8283. signed on December 27, 20 appmlsed value of$ . · Quitclaim Deed executed on December 29, 20 by
• (Grantor) to
(Grantee). The Deed also provided that the Grantor received $ consideration. by
• Quitclaim Deed executed on December 30, 20 (Grantee).
• Form 8283, signed on December 30. 20
• paid by • for the
(Grantee) to , Osting a property by an officer of I appraised value of$' Quitelafmf>eed executed· on February 15, 20 by • The Deed also provided that the Grantor received $ _ (Grantee). tGmntor) to· , for the consideration. , paid by The flowchart below Is based on the Quitclaim Deeds, Forms 8283, IRS Internal records, and county property records EXPLANATIONS OF ITEMS (Reo/. January 1994) tNumber Taxfd County Property Parcel:
___ Quitclaim Deeds provided by the organization revealed: _ ---~~---H- ___ Quitclaim Deed executed on July 1, 20·
• by
• Form 8283, signed on July 1. 20· by an officer of value of$ Qurtclalm Deed executed on October 27, 20·
• by
(Grantee).
(Grantor) to
• listing a property appraised
(Grantor) to (Grantee). , paid by
The Deed also provided that the Grantor received $ • for the consideration.
County Assessor website provided Information Indicated that the property was sold from
• to for$:_ on November 16, 20 .
2 by
• Quitclaim Deed executed on December 9, 20 (Grantee).
8 by an omoer Of
• FOrm 8283, sfgn6d on Dec::ember 9. 20 appraised value of$ (Grantor) to , llstfng a property The flowchart below fs based on the Qurtclafm Deeds, Fonns 8283, IRS Internal records, and county property records Form 886·A (1-1994) catalog Ntmber 20810W P-oe_§_ publistl.no.lra.gov Department dtbe T~ Revenue 8ervloe Fonn886-A EXPLANATIONS OF ITEMS
(Rev. January 1994)
---~-~---~---. ---
-~--- -~---·---·-·---~---·---·-··· --~~---~--County Property Parcel:
Quitclaim Deeds provided by the organization revealed:
Quitclaim Deed executed on June 25. 20 by •
• Form 8283. staned on June 25, 20 by an officer of valueof$ .
• QuHclalm Deed executed on July 13, 20 by (Grantee).
(Grantor) to listing a property appraised (Grantor) to , for the , paid by (Grantor). The Deed also provided that the Grantor received $ consideration.
2 by
• Quitclaim Deed executed on August 30, 20 (Grantee}.
(Grantor} to
(Rev. January 1994)
EXPLANATIONS OF 1TEMS
Tax-· · nk~
• Fonn 8283, signed on August 30, 20 'by an offtcer of appraised value of$. , riSting a property
• Quitclaim Deed executed on December 10, 20 2 by (Grantee). The Deed also provided that the Grantor received $. consideration.
(Grantor) to , paid by , for the
The flowchart below Is based on the Quftclalm Deeds, Forms 8283, IRS Internal records, and county property records -- ---·--- ---·--·-·--- ---····--- ---~--- ---. --- county er~rtv eame~:
Quitclaim Deeds provided by the Ofl1&niza~ revealed:
• Quitclaim Deed executed on May 26, 20 2 by, (Grantee).
(Grantor) to
• Quitclaim Deed executed on December 10, 20 2 by (Grantee). The Deed also provided that the Grantor received $. consideration.
(Grantor) to
0 paid by
The flowchart below Is based on the Quitclaim Deeds, IRS Internal records, and · property records for the county .Form886-A
(Rev. Janua.y 1994)
County ProperlY Parcel:
EX PLANA liONS OF tTEMS
Quitclaim Deeds provided by the organization revealed:
• Quitclaim Deed executed on December 27, 20 by (Grantee). y, … ended (Grantor) to ·u • Form 8283, signed on December 27, 20 1 by an officer of appraised value of $ , listing a property
• Quitclaim Deed executed on May 10, 20 by (Grantor) to (Grantor). The Deed also provided that the Grantor received $ paid by · the consideration.
• Quitclaim Deed executed on May 26, 20 t by (Grantee).
(Grantor) to
• QuHCiain Deed executed on December 10, 20 2 by (Grantee). The Deed also provided that the Grantor received $ consi~.
{Grantor) to ,paid by ,for , for the Folm 886-A EXPLANATIONS OF ITEMS
(Rev. January 1994)
Name cltaxpayer Tax Nllllber
--- ---
Property Parcel:
Quitclaim Deeds provided by the organization revealed:
{Grantee).
(Grantor} to
Quitcfalm Deed executed on December 28, 20
• by by an officer of
• Form 8283, signed on December 28, 20 value of$
• Quitclaim Deed executed on December 29, 20 by .
(Grantee). The Deed also provided-that the Grantor received $ consideration.
• Quitclaim Deed executed on December 30, 20 by (Grantee}.
Fonn 8283, signed on December 30, 20 by an officer of
• value of . .
2 by
Quitclaim Deed executed on February 15,
• _
• paid by
The Deed also provided that the Grantor ~ved $: , listing a property appraised (Grantor) to , for the , paid by (Grantee) to .listing.a property appraleed (Grantor) to (Grantee). , for the consideration.
Fonn886-A
(Rev. Janwuy 1994)
EXPLANATIONS OF ITEMS
Yew~Pedod ended
The flowchart below is based on the Quitclaim Deeds, Forms 8283, IRS Internal records and county property records · --- ·---·-··---······· ·--· -········. .. -·- -·-··- ··---·-~~···-·,.-····--··--·· County Property Parcet Quitclaim Deed& provided by the organization revealed:
• Quitclaim Deed executed on December 28, 20 by (Grantor) to (Grantee).
• Form 8283. ala ned on December 28, value of$ by an officer of listing a property appraised
• · Quitclaim Deed executed on May 10, 20 by Deed also provided that the Grantor received $ (Grantor) to (Grantee). The . paid by for the conslderaUon.
The flowohart below is based on the Quitclaim Deeds, Forms 8283, IRS Internal records and countY Pt0159ttY ·recoras · ·· · · · · · · Form 888-A (1-1994) Cetafog Number 2081tW Page_.i.Q. publklh.noJr&.QOY OepartrneM of the TNastlfy-lntemll Revenue Service EXPlANATIONS OF ITEMS
(Rev. January 1994)
Tax
Countv ProPerty Parcel: __ -·---
Quitclaim Deeds provided by the organization revealed:
Quitclaim Deed executed on December 27, 20 · • by (Grantee).
(Grantor) to , listing a property appraised by an officer¢
• Fonn 8283, signed on December 27, 20 value of$ exoouted on May 10, 20
• Quitcfaim ~ by
The Deed also provided that the Grantor received $ (Grantor).
(Grantor) to , for the , paid by consideration.
Quitclaim Deed executed oo May 26, 20 2 by • 3 by an oflloer of
• Fonn 8283, signed on May 26, 20 of$ .
• QuitdaJm Deed executed on December 10, 20 2 by The Deed also provided that the Grantor received $ (Grantee).
(Grantor) to , listing a property appraised value (Grantor) to (Grantee).
• for the consideration. , paid by
The flowchart below is based on the Quitclaim Deeds, Forms 8283, IRS Internal· recorda and county property records
(Rev. JaniUIJ)' 1994)
Meeting Minutes
An interView with and
• a trustee of indicated that minutes. He mentioned that has passed fJNiay.
EXPLANATIONS OF ITEMS
Tax ldentlic:allon Number VeariP811od ended , a trustee of • secretary of
• was conducted on ADrH 29, 20· by Agent . , a former trustee of
• was the one that used to take the was his companion and was very involved with the organization. She The meeting Information that provided to IRS was agendas, and not the minutes.
The agendas that were provided to IRS Usted shipping supplies, storage, fundrafsing, websltes, and other ftems of meeting discussion.
No property transfer transactions· of agendas for the years under examination. were listed as an Item of discussion in the meeting Eorms990 submitted an electronic registration Form 990N (ePost) card for the years 20 and 20 No Form 990 was filed by Financial tnforrbatfon had one bank account {aoct # xxxxx4445) In a examination.
Bank In the years under
Fonn 886--A (1-1994) catalog Number 2081rNI page … 1Z. publlsh.no.b.goy Department of the Treasury.lnlemal Rev8nue Service Form88G-A
(Rev. Januaf)' 1994)
EXPLANATIONS OF ITEMS
Tax ldentlf"IC811on Number provided copies of bank statements. The deposits and expenses are summarized below:
-
20 20.
Beginning Balance
Total Deposits ·---
Total Withdrawals & Exoenses
--
Ending Balance
The financial information provided that received the proceeds from property sales were $ and $ in the year 20 and 20· , respectively.
Interview with board ID§mber t officer o April 29, 20· Interview The interview was conducted by IRS agents with the following lndMduals:
• • • • • ,""EXecutiVe Dil'iCtor ,Oimctor ,Secre1ary , Trustee· Power of Attorney ---.. ·---·--~ ---·--~-·- .. --- ---··-·---·- --·--...
A question regarding the seHing price of the properties and the appraisal value was asked. answenKf, 'We knew about the appraisal value, but did not think muoh of it. They were just pleased that they were receMng $ . For the organization, $ Is a significant amount that would help them support their exempt purpose. They stopped doing these trarwactions once they were questioned by the IRS."
_ was asked the question, "Explain the consequences when the organization sells the property extremely below the FMV. The contributor of the property gets a substantial charitable contribution for the donation, and the buyer will benefit of purchasing the land extremely below ·3f.f!t'' ~~::~~tt~~w::~-P:t~'rt£IJ:eui!iro! ~:~:ie motivated toile~-:,~ these transactions since they were under the impression there was nothing wrong about them. He explained that the Promoter approached them with a donor, which donated the properties, and provided a buyer that would buy them for roughly $ . He stated that the money went for charitable purpose. • A question asked to regarding the receipts for the property transactions that were given to the buyers and donors. responded that, •No receipts were given; only the thank-you· note, where it stated the contribution amount and the selling price. Moneys from the sale of the propert~· can be traced to thefr' Account. •
(Rev. January 1994)
EXPLANATIONS OF ITEMS was asked, Was the board aware they had signed form 8283 that stated the appraisal value of the properties that were donated, and that amount It was sold for? " replied that, "He was told that the properties were worthless and that he felt that the real worth of the property is the amount the market is wllllng to pay." also indicated that he acknowledged that the transaction might appear questionable, but at the time he felt that there was nothing wrong with them.
A question regarding the sate valUe vs. an appraisal value on the Form 8282 and Form 8283 was asked to . replied that she was not aware of the appraisal value, and was given all the forms already pre--fiRed by • All she did is sign them. She exp1ained further that we were given the filed out Quftolalm-deecls. and we took the Quitclaim-deeds to get them notarized at the bank. also added that prepared all the paper work and Quitclaim-deeds for all the transactions. AI we did was sign them and/or get them notarized. We were not invo1ved in the process of the seller-buyer negotiation.
• Octo~ 24. 20 Interview
An Interview was conducted with , a board member of The following are questions asked to, and answers provided, -by---~-~~--- ---~---~~---~ --Q: Old the have a letter aareement with that basically says that the would accept properties ff could aasure to find the buyers for the properties. And if could not find the buyers, then would have to buy It back from the ?
A:. I do not reoal/ anything like that.
Q; Did the board ever contact the donors before or after the donation? If no, why?
A: No. 88id not to MIOI1)' about thanldna the Donors, just thank me. I Mver taikecl to them orfHnaUed them It was just between and myself.
Q; Old the board ever try to contact the buyer to negotiate the sale price? If yes, explain. If no, ~~ .
A: No. That Is part of the oral agreement with organization does not have to do lt. .
- . . . that he would try to find a buyer, so the Q: Use ·the property (ParceiiD: ) as an example. The Fonn 8283 signed by your organization Indicated that you knew the appraisal value of the property was $ . Please explain why the board .agreed to exchange a prope~y worth of$ for$ A'. Booause that was the agreement with Q: Old the ever try to seU the property on the market? If yes, explain. If no, why?
(Rev. January 1994)
EXPLANATIONS OF ITEMS
Name of taxpayer TIIX
A:. No. That Is part of the oral agreement with organization does not have to do it.
Jntervtew with a tblrd party that he would try to find a buyer, so the An interview was conducted with by the examiner on October 23, 20 The following are the questions asked to and answers provided by Q: How do you know The ?
A: Myfrtend he spoke of the foryeam
Q: What is the relationship between you and The 'I A: No specific f918tionshlp. I just h6lp friends and fsmHy that owned properties that do not want to own th8 properties anymore. So, they decided to make the charitable donation.
---~<"I:--Aid you ~ th8se-properties prior to 20 ? If yes, how and. when did you acquire these··-- --- ---· --- properties?
A: Yes. I owned au of those properties and I need to check my records for exaot day. I acquired through tax 88/eB.
Q~ Did you market those properties to the buyers? If yes, how?
A:. I tried to sale them1 but 1 could not. 1 could not keep them because I could not atlOid the real estate taxes. So, 1 offer deals to my frf6nds thBt 1 would convey the property to the buyer and the buyer paid the pfOpefty taxes. If the propetty sold, th8n the buyer would get half of the procesds after they lir8t got their propelty t8Xea and fees back.
Q: Old you have any agreements between you and The r~an:Ang the property transfers? If yes, please explain.
A: Yea We have a .iettsr agiNment. fii6 a~nt basically ssys that the _ woutd accept properties If I could aSSU/8 to find the buyers. And If I could not find the buyer, then I have to tako It back for s smaU amount. So, the charity Mds up with some cash amounts.
Q: VVho was the appraiser of these propertiea that were deeded In and out of The paid the appraiser?
A: was the appraiser. 1 paid for the appraisal fees and the property ownem · reimbursed the appraisal fees back. The appralssl fe88 were arranged from $ -$ .
?Who
Fonn 886-A (1-1994)
Catalog Ntanber 2081CW
PeQe --1§. · pubtl!m.no.h.gov Department of the Treasury-Internal Revenue 8eNice Form8864\
(Rev. Janliary 1994)
Nama of~
EXPLANATIONS OF ITEMS
Q: What documents did you prepare for each of the transactions? Quitclaim Deed, Form 8282, Form 8283?
A'. I pr&pared the quitclaim deed. 1 partfally prepared Forms 8283, and I prepared the Forms 8282.
Q: The properties were sold at a much lower amount than the appraised fair market value, according to the Forms 8283 that were prepared and filed with IRS. Can you tell why?
A: The .market Is c/epres8ed.

# LAW

IRC §501(a) provides, in paris that organizations described In IRC §501(c) are exempt from federal Income tax. Seotlon 501 (o)(3) of the Code detaibes, In part. an organization that Is organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, no part of the net earnings of which Inures to the benefit of any private shareholder or Individual. · ·Treasury Regulations §1.501(o){3)-1(a)(1) states that In order to be exempt as an organization descrtbed In section 501(o)(3), an organization must be both organized and operated exclusiVely for one or more of the purposes specified in such section. If an organization falls to meet either the organizational test or the operatJonaJ test, it Is not exempt Treasury Regulations §1.601(o)(3)*1(c)(1) states that an organization will be. regarded as •operated axcluliVefy" for one or more exempt purposes only If 1 engages primarily in actMtles which accomplish one or more of such exempt purposes specified In section 501(0)(3) •. An organization will not be so regarded If more than an insubstantial part of its activities Is not in furtherance of an exempt purpose.
Treasury Regulations §1.501(c)(3)-1(o)(2) states 1hat'an organization Is not operated exclusively for one or more exempt purposes if its net earnings inure rn whole or I~ part to the benefit of private shareholders or Individuals.
· Treasury RegUlations §1.501 (a)-1 deflnes •private shareholder or indMduar' as a person •having a personal and private interest In the a<:tivM:tS of the organization. . .. ··- . . . .
Treasury Regulations §1.601(o)(3)-1(d){1)(il) states that an organization Is not organized or operated exolualvely for one or more of the purpQBGS speolfied In subdMslon (I) of thl8 subparagraph unless It serves a public rather than a private interest. Thus, to meet the requirement of this subdivision, H is necessary for an organization to establish that H is not organized or operated for the benefit of private Interests such as •ignated individuals, the a-eator or his family, shareholders of the organization, or persons contrail~. directly or Indirectly, by SC;Ach private interests.
·
Fonn886-A
(Rev. January 1994)
Nameotlmcpayer
GOVERNMENT'S POSITION
EXPLANATIONS OF ITEMS
Year1Pelfcxl ended
It is the Government's position that the organization has failed to meet the operational test described in Treasury Regulation Section 1.501(c)(3)-1(c)(1). In order to continue tax-exempt status an organization must prove that it is operated exclusively for tax-exempt purposes and that no part of its net earnings inured to the benefit of any private Individuals.
The government does not contest that tuition valued at $XXXXX to school children In delivered uniforms, shoes, school suppUes, and during the years of examination.
However, was also providing a significant private benefit to donors by participating In and facilitating an abusive property donation scheme that was promoted by in the years under examination. The property donation eoheme Involves properties owned by . and or more participants.
In this scheme, sold a piece of real property to a donor for a very small price; the donor held the property for a year and then donated the property to the . As soon as the property was donated to the , the sold the property for a small dollar amount, while contemporaneousry executing documents showing a high appraised value of ihe donation. Although the exampt organization FeGelved a small amount from these transastlons, It Is clear that the pdmary purpose-- of the transactions was to provide fnftated charitable contributions to donors. Most properties wera transferred to the exempt organization, then sold within daYs. Properties were them either donated to the organization again, by another donor, or sold back to for the same low price. The donors who made the real property donation( e) to then Claimed non-cash deductions on their Fonns 1040.
All transactions were created on a QUITCLAIM DEED. All transactions started wtth and eventually ended with receiving the same property back Into his ownership. All propertJ8s found, are located In . AD sales or transfers occur In or another state. I.e. all transactions cross state lnes. All properties were sold for$ or less. usually for$ . All participants Who made the real property donation(s) took appalsal value reported on form 8283 as deduction( B) on their Fonn 1040, Schedule A under Non cash Donations for the years under examination. Th~ participants, identified at this time, usuaRy partake in this property donation scheme more than once. has failed to show that Is •operated exclusively" for one or more exempt purposes because: o Is not organized and operated exclusively for religious, charitable, educational or any other §501(c)(3) purpose. · o Is not organized and operated exclusively for public purposes. o is operated for the tienefif of private individuals. · participated In and facilitated an abusive property donation scheme. The fact that engaged. in some charitable work was not enough to receive continued recognition as an exempt organiZStlon under~n 501(c}(3) of the Internal Revenue Code.
Fonn 886-A (1-1994)
Catalog Number 20810W Pege_jz publlth.noJra.p Deplltmerlt of the TreatU~Y-Intemal Revenue SeMce
(ReV. JamafY 1994)
EXPLANATIONS OF ITEMS
Tax Ide~
Number

# CONCLUSION

The tax exempt status of under Section 501 (c)(3) of the Internal Revenue Code should be revoked because the organization has not estabRshed that It ts observing the conditions required for the continuation ofits exempt status as operating exclusively for 501(c)(3) purpose.
The effective date of proposed revocation Is January 1, 20 , the first day of the tax year under examination.
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