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June 12, 1950


The opinion of the court was delivered by: Igoe, District Judge.

Findings of Fact

1. The club duly filed a claim for refund, on December 31, 1946, on behalf of Albert Will, a member of the club who had paid during the tax period in question taxes in the total amount of $32 and whose power of attorney was attached to the claim. (Stip. Exs. A, B.) The claim for refund was disallowed November 2, 1948. (Stip. Ex. I.)

2. On October 31, 1949, 775 other members filed powers of attorney. Taxes collected by the club from those members in the total amount of $6,726 were paid to the Collector of Internal Revenue within the period of October 31, 1945, through December 1946. No other powers of attorney have been filed. (Stip. Exs. B, C.)

3. The club was incorporated as a nonprofit organization under Illinois law in 1937. (Tr. 12; Stip. Ex. F, 1, 10.) Its objects, as stated in its charter and by-laws have been, from the beginning, "To promote and maintain an organization for the mutual advancement and welfare of its members, the industries with which they are concerned, and the city of Chicago, the State and the Nation." (Tr. 35; Stip. Ex. F, 10.) A further aim of the club was "to provide a friendly setting that would serve as a meeting place and a clearing house for those engaged in the mercantile and manufacturing world", and the club was successful in "advancing the interests of its members". (Stip. Ex. F, 1.)

3½. The club occupied quarters with a total floor space of 35,000 square feet in the north east portion of the second floor of the Merchandise Mart at 222 North Bank Drive, Chicago, the entrance to the club being off the lobby in front of the central bank of elevators. (Tr. 11, 22.)

4. The material provisions of the by-laws relating to membership are as follows: "The membership * * * shall consist of any male or female white person of legal age and in good standing in the community in which said person resides or conducts his or her business". Members are classified as regular, resident, honorary, press and privileged. Honorary members must have rendered "unusual services or achievements in the advancement of the interests and purposes of" the club "or in either the manufacturing or retailing field". The press classification consists of "certain specified members of the Press". The privileged members were representatives of the "Government, City, County, State and Federal — Clergymen, teachers, librarians and Foreign Consuls". All applicants for membership must be sponsored by two members, recommended by the admissions committee and elected by a majority vote of the Board of Governors. A regular membership is transferrable to anyone approved by the Board of Governors. For regular members the initiation fee is $100 and the annual dues $60, for nonresident members, $25 and $20 respectively. An additional charge of $8.50 a month is made for the privilege of using the athletic department. "Any member may be dropped for conduct injurious to the interest or welfare of the club or its members". (By-laws Arts. IV, VI; Tr. 109.)*fn1

4½. Among the standing committees is an athletic committee of not less than five members. The by-laws provide that "The Athletic Committee shall originate and formulate plans for athletic activities, these activities to be in keeping with the wants and desires of the membership, and said committee shall introduce rules and regulations governing the athletic activities and the prices to be charged".

Another standing committee is the membership committee which "shall effect all possible means of securing and expanding the membership of the club". (By-laws Art. XV.)

5. During the tax period in question the club had a total of 905 members, grouped as follows with respect to occupation and sex:

Men   Women   Total
  Home furnishings                  715    13      728
  Manufacturers' representatives     60    12       72
  Professional                        8     0        8
  Miscellaneous (including
    50 to 55
    members of the
    press; 10 to 12
    privileged)                      93     4       97
                                    ___    __     ____
                                    876    29      905

(Stip. Ex. E; Tr. 24, 52, 53, 54.)

6. Residents of Chicago and vicinity can enjoy the privileges of the club as guests of members if accompanied by a member. The same guest may not be introduced oftener than once in thirty days except in private dining rooms. Privileges of the club may be extended to nonresident guests, who may be given privilege cards for a period of two weeks (once every ninety days). (Stip. Ex. F. p. 12.) Guests, who may be either men or ladies, have full privileges of the club on the same basis as a member and may introduce guests, either men or ladies, if accompanied by the member. Guest cards are issued on the same basis as by "other clubs". Ladies have the same use of the club as men, except that they cannot use the athletic department. (Tr. 97-100, 103.)

6½. The House Rules provide that "The main dining room, cafe and private dining rooms are for the use of members and their guests. Restaurant privileges may not be extended to organizations unless sponsored by a member of the club, who is also a member of the organization desiring to use these privileges". The House Rules also provide as follows: "Members and their guests are requested to wear suit coats when coming to the club. This rule will be strictly enforced. * * * All members and their guests must check their overcoats and hats at the entrance before using the club". (Stip. Ex. F. p. 12.)

7. The quarters of the club consist of the following rooms: Lobby and lounge, cafe and bar, called the Trading Post, main dining room with seventeen sliding doors by the use of which the area can be divided into six separate rooms, athletic department, kitchen, shower bath and change rooms for men, and, presumably rest rooms for ladies and for men. (Ex. F. pp. 3-4, 6-9; Tr. 84, 102.) The rooms are air conditioned throughout. (Tr. 73.)

8. The lobby or lounge has an area of 1444 square feet and contains five large lounges, five or six easy chairs, all upholstered, two writing desks and chairs, two reading tables, an office, and a cigar counter. The room is done in two color schemes. The carpet is colored to match the furniture, the walls are of cement and the ceiling has modern acoustic properties. (Tr. 67, 69, 70-73.) This room, its ...

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