
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC502]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                   Subchapter F--Exempt Organizations
 
                          PART I--GENERAL RULE
 
Sec. 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.

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


                               Amendments

    1969--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.

                  Section Referred to in Other Sections

    This section is referred to in section 501 of this title.
