I.R.C. § 502(a) General Rule —
An organization operated for the primary purpose of carrying on a trade or business
for profit shall not be exempt from taxation under section 501 on
the ground that all of its profits are payable to one or more organizations exempt
from taxation under section 501.
I.R.C. § 502(b) Special Rule —
For purposes of this section, the term “trade or business"
shall not include—
I.R.C. § 502(b)(1) —
the deriving of rents which would be excluded under section 512(b)(3), if section 512 applied to the organization,
I.R.C. § 502(b)(2) —
any trade or business in which substantially all the work in carrying on such trade
or business is performed for the organization without compensation, or
I.R.C. § 502(b)(3) —
any trade or business which is the selling of merchandise, substantially all of
which has been received by the organization as gifts or contributions.
(Aug. 16, 1954, ch. 736, 68A Stat. 166; Dec. 30, 1969,
Pub. L. 91-172, title I, 121(b)(7), 83 Stat. 542.)
BACKGROUND NOTES
AMENDMENTS
1969--Pub. L. 91-172 redesignated first sentence of existing provisions as subsec. (a), and substantial
portion of second sentence as subsec.
(b)(1), and, in subsec. (b)(1) as so redesignated, inserted reference to section 512
of this title, and added pars. (2) and (3).
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years beginning after Dec. 31, 1969, see section 121(g)
of Pub. L. 91-172, set out as a note under section 511 of this title.
