Rev. Rul. 56-120

Advice has been requested concerning the applicability of the tax on admissions, imposed by section 4231 of the Internal Revenue Code of 1954, and the deductibility as a charitable contribution, under section 170 of the Code, in cases where payment of an amount designated as a contribution entitles a person to admission to a motion picture exhibition.

In the instant case an organization operated exclusively for charitable purposes, exempt from income tax under section 501(a) as an organization described in section 501(c)(3) of the Code, presented a premier showing of a motion picture as a part of a campaign to raise funds. The entire operation connected with the showing of the motion picture, including the picture, theatre and staff, and the printing of tickets, was made available to the organization without charge. The prices for tickets sold in connection with the performance were $25, $10, and $5. The net proceeds from sale of the tickets inured exclusively to the benefit of the organization.

Section 4231 of the Code imposes a tax on the amount paid for admission to any place, including admission by season ticket or subscription.

Section 4233(a)(1)(A)(iii) of the Code provides in part for exemption from the tax imposed by section 4231 of the Code with respect to admissions all the proceeds of which inure to a corporation or any community chest, fund, or foundation organized and operated exclusively for charitable purposes, exempt under section 501(a) as an organization described in section 501(c)(3) of the Code, if such corporation or organization is primarily supported by contributions from the general public. However, under the provisions of section 4233(a)(1)(C)(iv) of the Code, the exemption provided by section 4233(a)(1)(A)(iii) of the Code does not apply in the case of admissions to any motion picture exhibition.

Section 170 of the Code provides for the deduction from gross income, in computing taxable income, of contributions or gifts payment of which is made within the taxable year to or for the use of such organizations therein specified.

The instant organization is the type of charitable organization contemplated by section 4233(a)(1)(A)(iii) of the Code but the specific exclusion from exemption contained in section 4233(a)(1)(C)(iv) precludes the exemption which would otherwise apply to an admission charge. However, where payment of an amount designated as a contribution entitles a person to admission to a place and the designated contribution is so large that it is obviously intended to be more than a payment for admission, there is warrant for the recognition of a contribution within the payment.

Accordingly, it is held that the amount paid for admission to a motion picture exhibition, as a part of a campaign to raise funds for an organization operated exclusively for charitable purposes, is considered a charitable contribution, deductible under section 170 of the Code, to the extent that the amount exceeds the amount which would ordinarily be paid for admission to that motion picture, provided no other form of entertainment or refreshments are received. That part of the amount paid which is considered a contribution is not a charge for admission and, therefore, is not subject to the admissions tax. However, the amount which represents the admission charge is subject to the admissions tax since, under section 4233(a)(1)(C)(iv) of the Code, admissions to a motion picture exhibition are nonexempt regardless of the nature of the organization which conducts the affair or the disposition made of the proceeds. The breakdown of such payment is illustrated by the following example: If a $25 ticket entitles a person to seating accommodations for which the usual admission charge to a premier showing of a motion picture is $12.50, the amount of $12.50 would be subject to the ten percent admissions tax, and $11.25 ($25.00 minus $13.75, the admission charge plus tax) would be regarded as a contribution.

Revenue Ruling 112, C. B. 1953-1, 411, relating to a "donation" made in lieu of a payment of a fixed charge for admission to a motion picture, was based on circumstances which are not similar to those in the instant case, and is not affected by the holding in this case.