*39 Decision will be entered for the respondent.
Held, where one activity carried on by petitioner prevents it from satisfying the requirements of section 101 (9), and petitioner's other principal activity is inconsistent with section 101 (10), petitioner is not an exempt organization notwithstanding that an organization carrying on as its sole activity either of the two principal functions carried on by petitioner might qualify for an exemption under one of the two foregoing provisions. Sec. 101, Internal Revenue Code of 1939.
*372 Respondent has determined a deficiency in the income tax of petitioner for the calendar year 1948 in the amount of $ 327.15. The sole issue is whether petitioner is exempt from liability for 1948 income taxes under the provisions of section 101 (9) or of section 101 (10) of the Internal Revenue Code of 1939.
FINDINGS OF FACT.
A stipulation of facts filed by the parties is incorporated herein by this reference.
Petitioner is a Pennsylvania corporation with principal address on North Second Street, in Allentown, Pennsylvania. Its Federal income tax return for the calendar year 1948 was filed with the collector of internal revenue for the first district of Pennsylvania at Philadelphia, Pennsylvania.
Petitioner was organized under the laws of the Commonwealth of Pennsylvania on April 10, 1922, under the name Allgemeiner Arbeiter Unterstuetzungs Verein. In October of 1939 the charter was amended and petitioner's name changed to that which it now bears. It is composed of persons of Austrian and German descent living in the vicinity of Allentown, Pennsylvania. It was organized to provide mutual assistance in case of sickness or death of its members, but its scope was*41 expanded to include extensive social activities.
On March 1, 1945, respondent ruled that petitioner was exempt from Federal income taxes under the provisions of section 101 (8) of the Internal Revenue Code of 1939. On November 30, 1948, respondent revoked that ruling, but did not apply such revocation retroactively to years prior to the calendar year 1948. The tax at issue is income tax for the calendar year 1948 in the amount of $ 327.15.
Petitioner originally took the position that it was entitled to an exemption under section 101 (3), 101 (8), or 101 (9). In its amended petition it asserted section 101 (10) as another section under which, in the alternative, it claimed an exemption. At the trial it withdrew its claim under sections 101 (3) and 101 (8), thereby leaving only section 101 (9) and section 101 (10) to be considered.
During the calendar year 1948 the membership of petitioner consisted of 631 "active" members and 452 "social" members. Only active members were entitled to sickness and death benefits. Both classes of members were entitled to the privileges of the club facilities, including clubroom, bowling alleys, and other social and recreational activities.
In order*42 to qualify as an active member an applicant has to be between the ages of 16 and 45, reside within a 15-mile radius of Allentown, Pennsylvania, and furnish a certificate signed by the petitioner's physician respecting the applicant's physical and mental health. *373 Active members pay dues of $ 1 per month, which are deposited in an account known as the Beneficial Account. Such members are assessable, but it has never proved necessary to require an assessment. An active member retains his status as such until he becomes delinquent for a certain period in the payment of dues, or transfers to a hazardous occupation. Payments to the Beneficial Account are not refundable. Sickness and death benefits are fixed, and cannot be increased or decreased by the payment of different dues. The benefits are as follows:
(a) Sickness Benefits.
$ 9 per week for 26 weeks;
$ 6 per week for the next 26 weeks;
$ 2 per week thereafter until $ 540 in benefits had been received.
(b) Death Benefits.
Upon the death of an active member in good standing, his wife or estate, whichever he designated, receives $ 150.
Upon the death of the wife of an active member, the member receives*43 $ 75.
Social members are persons who are under the age of 16 or over the age of 45 when applying for membership, or who are unable to pass the physical examination, or who cannot afford the dues required of active members. Most social members under 45 years of age eventually become active members. Social members pay dues of $ 1 per year. They do not participate in the sickness and death benefits available to active members, but have the same rights with respect to the use of petitioner's social and recreational facilities.
During 1948 petitioner owned a building located at 320-326 North Second Street in Allentown, Pennsylvania. Use of the building is for members and their guests. In connection with this building petitioner operates a bar, bowling alleys, and various social and recreational activities. Receipts from the foregoing facilities and activities, as well as dues from social members, are deposited in an account known as the House Account. Expenditures in connection with those activities are paid from the House Account, while expenditures in respect of sickness and death benefits are paid from the Beneficial Account. The Beneficial and House Accounts are kept in*44 separate books.
In 1946 the Beneficial Account "borrowed" $ 2,500 from the House Account, which loan was repaid in 1948. In 1948 the Beneficial Account "loaned" $ 5,500 to the House Account.
In 1948 the expenditures of the House Account were for general operating expenses of the bowling alleys, bar, merchandise, and other social and recreational activities and facilities. None of such disbursements was for the direct benefit of the Beneficial Account. No deposits have been made in one account of proceeds of the other account, except in respect of the "loans" intended to be repaid.
*374 Petitioner paid a total of $ 3,540 in sickness benefits and $ 450 in death benefits during 1948. During that year it received $ 7,388 from death and sick benefit dues, assessments, and initiation fees. It realized a gross profit from sales, income from bowling, and other social and recreational facilities, and interest, in the total amount of $ 33,230.86.
Petitioner, during the year 1948 was not a club organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes.
Less than 85 per centum of petitioner's income in 1948 consisted of amounts collected from members*45 for the sole purpose of meeting losses and expenses related to the activities represented by the Beneficial Account.
OPINION.
Section 101 of the Internal Revenue Code of 1939 reads in part as follows:
SEC. 101. EXEMPTIONS FROM TAX ON CORPORATIONS.
Except as provided in paragraph (12) (B) and in Supplement U, the following organizations shall be exempt from taxation under this chapter --
* * * *
(9) Clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder;
(10) Benevolent life insurance associations of a purely local character, mutual ditch or irrigation companies, mutual or cooperative telephone companies, or like organizations; but only if 85 per centum or more of the income consists of amounts collected from members for the sole purpose of meeting losses and expenses.
Petitioner argues that the activities surrounding the House Account are exempt under section 101 (9) and those surrounding the Beneficial Account are exempt under section 101 (10). Therefore, it argues, since each of the two principal functions carried on by petitioner, taken separately, *46 is a function which qualifies for an exemption, petitioner should be held in its entirety to be exempt. We are of the opinion that in making such argument petitioner has misconceived the nature of the privilege granted by section 101.
Section 101, unlike section 22 (b), does not exclude from the reach of the Federal income tax any particular type of income, but rather exempts organizations, which would normally be taxpaying entities, from the necessity of paying tax upon items that otherwise would constitute taxable income. Cf. Scofield v. Corpus Christi Golf & Country Club, 127 F. 2d 452, 454 (C. A. 5). In order to succeed in this proceeding petitioner must show not that any part of its income is exempt from tax because of the nature of that income, but that whatever the nature of any particular item of income, no tax is due thereon, *375 because petitioner itself as an entity is exempt from the duty of paying income taxes. Petitioner must show that it is wholly within some provision of section 101 granting such exemption. The sources of petitioner's receipts are relevant only as an incident to this main issue, and have no independent*47 significance.
If in fact we had here two separate organizations, each carrying on one of petitioner's two principal functions, we might well hold that one such organization is exempt as a social club under section 101 (9) and the other as an organization within the scope of section 101 (10). In fact, however, there was only one organization, this petitioner, which carried on both functions. There is no statutory authority, whatever the equities, permitting the exemption of an organization, however worthy, which cannot fit itself within one of the various subdivisions of section 101. Petitioner cannot successfully seek an exemption as though it were two separate entities. It is either exempt as a unit, without a splitting of itself in half, or it is not exempt.
Petitioner is not exempt under section 101 (9) because the activities represented by the Beneficial Account prevent it from being a club operated "exclusively for pleasure, recreation, and other nonprofitable purposes." "Other nonprofitable purposes" means purposes of the same general character as pleasure and recreation. Cf. Chattanooga Automobile Club v. Commissioner, 182 F. 2d 551 (C. *48 A. 6); Allied Trades Club, Inc., 23 T.C. 1017">23 T. C. 1017.
Nor can petitioner satisfy the requirements of section 101 (10). It was only partially engaged in such activity as is therein contemplated and it clearly appears from the record that less than 85 per centum of its income in 1948 consisted of amounts collected from members for the sole purpose of meeting losses and expenses connected with its beneficial or insurance activity.
Thus, petitioner is not an exempt organization under the provisions of section 101 (9), nor does it qualify for exemption under section 101 (10). In fact, counsel for petitioner does not seriously urge that petitioner falls wholly within either of the above two provisions. It is contended instead that, since of its two functions either alone would qualify an organization for exemption, the "whole is equal to the sum of its parts," and petitioner should therefore be held to be a tax-exempt entity. Tempting as it is to accept this argument we cannot do so because the result would do violence to the statute. The remedy, if any, must lie with Congress, and not in a tortured judicial application of the statute, however worthy the objective. *49 The statute plainly sets forth various separate grounds for exemption. Petitioner must qualify under one of the paragraphs of section 101 in order to prevail. As an entity, it does not qualify under paragraph (9), nor does it satisfy the requirements of paragraph (10). There is nothing in the statute permitting the taxpayer to fragmentize itself and gain exemption *376 piecemeal. It either falls within one of the exemption paragraphs or it does not; and on the record before us we cannot hold that it satisfies the requirements of either (9) or (10), the only two paragraphs upon which it relies. Perhaps Congress had its own reasons for demanding compliance in full with the requirements of one of the paragraphs. In any event, that is the way the statute is written, and if a different result is to be reached the statute should be amended.
Decision will be entered for the respondent.