1.501(c)(7)-1. Social clubs
(a) The exemption provided by section 501(a)for organizations
described in section 501(c)(7) applies only to clubs which are
organized and operated exclusively for pleasure, recreation,
and other nonprofitable purposes, but does not apply to any
club if any part of its net earnings inures to the benefit of
any private shareholder. In general, this exemption extends
to social and recreation clubs which are supported solely by
membership fees, dues, and assessments. However, a club otherwise
entitled to exemption will not be disqualified because it raises
revenue from members through the use of club facilities or in
connection with club activities.
(b) A club which engages in business,
such as making its social and recreational facilities available
to the general public or by selling real estate, timber, or
other products, is not organized and operated exclusively for
pleasure, recreation, and other nonprofitable purposes, and
is not exempt under section 501(a). Solicitation by advertisement
or otherwise for public patronage of its facilities is prima
facie evidence that the club is engaging in business and is
not being operated exclusively for pleasure, recreation, or
social purposes. However, an incidental sale of property will
not deprive a club of its exemption. [Reg. §1.501(c)(7)-1.]
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