Rev. Rul. 54-115

Advice is requested whether the exemption provided by section 1701(a)(1)(A)(ii) of the Internal Revenue Code applies to charges for admissions to affairs conducted by an alumni association, the proceeds of which inure to a development fund created by an exempt educational institution for the purpose indicated.

The development fund is a nonprofit organization created and controlled by the board of trustees of an exempt university as the official agency for soliciting funds for the university. Its purpose is to assist in developing and increasing the facilities of the university for broader educational opportunities and services to its students, alumni, and citizens of the State by encouraging gifts of money, property, works of art, and the like, and to receive, hold, and administer such gifts. Gifts may be solicited only for purposes previously approved by the board of trustees of the university. The development fund is exempt from payment of income tax under section 101(6) as an organization operated exclusively for educational purposes.

Section 1701 of the Code provides in part as follows:

No tax shall be levied * * * in respect of-

(a) CERTAIN RELIGIOUS, EDUCATIONAL, OR CHARITABLE ENTERTAINMENTS, ETC.-

(1) IN GENERAL.-* * * any admissions all the proceeds of which inure-

(A) exclusively to the benefit of-

*

(ii) an educational institution which is exempt under section 101(6) or which is an educational institution of a government or political subdivision thereof, if such organization normally maintains a regular faculty and curriculum and normally has a regularly organized body of pupils or students in attendance at the place where its educational activities are regularly carried on;

* if no part of the net earnings thereof inures to the benefit of any private stockholder or individual;

*

(2) NONEXEMPT ADMISSIONS.-The exemption provided under paragraph (1) shall not apply in the case of admissions to (A) any athletic game or exhibition unless the proceeds inure exclusively to the benefit of an elementary or secondary school or unless in the case of an athletic game between two elementary or secondary schools, the entire gross proceeds from such game inure to the benefit of a hospital for crippled children, (B) wrestling matches, prize fights, or boxing, sparring or other pugilistic matches or exhibitions, (C) carnivals, rodeos, or circuses in which any professional performer or operator participates for compensation, or (D) any motion picture exhibition.

It is held that the charges for admission to an affair conducted by an alumni association the proceeds of which are paid into the development fund established under the above circumstances inure, in effect, to the educational institution and are exempt from the tax on admissions imposed by section 1700(a) of the Code, except as otherwise provided by section 1701(a)(2) of the Code.