TAXATION-FEDERAL INCOME TAX-EXEMPT CORPORATIONS-STATUTORY INTERPRETATION

Authors

Patrick J. Ledwidge, University of Michigan Law SchoolFollow

Abstract

Plaintiff corporation was organized in 1947 by physicians who had formerly maintained a clinic for the practice of medicine as a partnership. The articles of incorporation provided that there should be no capital stock and no dividends, and stated that plaintiff was organized as a non-profit corporation for the purpose of providing medical treatment and hospitalization to sick and injured persons without regard to ability to pay therefor, and of providing such other incidental charitable services as the "trustees" of the corporation should prescribe. Pursuant to its by-laws, plaintiff paid such annual salaries to its member physicians as the trustees, who were elected by the members, directed. Plaintiff never maintained a hospital, and its sole charitable service was the rendering of medical treatment at its clinic to persons unable to pay therefor, although the vast majority of plaintiff's patients paid fees to the corporation. Over plaintiff corporation's objection that it was exempt from taxation under section 101(6) of the Internal Revenue Code, the Commissioner assessed income taxes on plaintiff's 1948 net income, which plaintiff paid. In an action to recover' the tax, held, plaintiff is not exempt from income taxation since it was neither organized nor operated exclusively for charitable, educational, or scientific purposes, and since at least part of its net earnings inured to the benefit of private individuals. Fort Scott Clinic and Hospital Corp. v. Brodrick, (D.C. Kan. 1951) 99 F. Supp. 515.

Recommended Citation

Patrick J. Ledwidge, TAXATION-FEDERAL INCOME TAX-EXEMPT CORPORATIONS-STATUTORY INTERPRETATION, 50 Mich. L. Rev. 950 (1952).
Available at: https://repository.law.umich.edu/mlr/vol50/iss6/19