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U.S. Code as of:
01/19/04
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.
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