This rule for cases under subsection (c) (7) has been repeatedly followed. The other authority on which the taxpayer relies here is Mill Lane Club, Inc., 23 T.C. 433 (No. 52), which involved a situation under (c)(7) where the club sold its capital assets in contemplation of dissolution. The Tax Court upheld the tax-exempt status on the theory that the sale of the capital assets was an incidental sale, without the profit motive, and that the conversion of the assets into cash before distribution to the club's members was merely more convenient and sensible than distributing to each member an undivided fraction of an interest in each asset (in which case there would, of course, be no 'net earnings' to destroy tax-exempt status).
The record indicates that his change of position as to Maynard's tax-exempt status may to some extent have been prompted by the final distribution of Maynard's accumulated "tax free" earnings to stockholders. In Mill Lane Club, Inc., 23 T.C. 433 (1954), we held that a tax-exempt social luncheon club did not lose its exemption for the year it dissolved and sold its assets and distributed the proceeds left after payment of debts to its members. We said that the liquidating sale of the assets was not a profit-making transaction but was a singular event in the club's history and pointed out that the fact that the charter of a social club provided for the distribution of its assets to its members upon dissolution did not destroy the exempt status of the social club.
The record indicates that his change of position as to Maynard's tax exempt status may to some extent have been prompted by the final distribution of Maynard's accumulated ‘tax free’ earnings to stockholders. In Mill Lane Club, Inc., 23 T.C. 433 (1954), we held that a tax-exempt social luncheon club did not lose its exemption for the year it dissolved and sold its assets and distributed the proceeds left after payment of debts to its members. We said that the liquidating sale of the assets was not a profit-making transaction but was a singular event in the club's history and pointed out that the fact that the charter of a social club provided for the distribution of its assets to its members upon dissolution did not destroy the exempt status of the social club.