26 U.S.C. § 502

Current through P.L. 118-62 (published on www.congress.gov on 05/13/2024)
Section 502 - Feeder organizations
(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.

(b) Special rule

For purposes of this section, the term "trade or business" shall not include-

(1) the deriving of rents which would be excluded under section 512(b)(3), if section 512 applied to the organization,
(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
(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.

26 U.S.C. § 502

Aug. 16, 1954, ch. 736, 68A Stat. 166; Pub. L. 91-172, title I, §121(b)(7), Dec. 30, 1969, 83 Stat. 542.


AMENDMENTS1969-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.

trade or business
The term "trade or business" includes the performance of the functions of a public office.