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Evaluate the IRS's Proposal in a Memo to the Research File

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Heal, Inc., a tax-exempt hospital, was sold to its shareholders for $6.6 million. The IRS determined that the fair market value of the hospital was $7.8 million. An IRS agent is proposing that the tax-exempt status of the hospital be revoked because the sale of the hospital to the shareholders for less than the fair market value resulted in "private inurement" to them. Evaluate the IRS's proposal in a memo to the research file.

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The solution evaluates the IRS's proposal in a memo to the research file.

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Subject: Private Inurement

Private inurement as contained in section 300 of the Code prohibits the following:
? "the flow or transfer of income or assets of a tax-exempt organization (one that is subject to the doctrine) through or away from the organization, and
? the use of ...

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