Before MARIS, McLAUGHLIN and HASTIE, Circuit Judges.
McLAUGHLIN, Circuit Judge.
These two related corporations appeal the determinations of the Commissioner, affirmed by the Tax Court at 24 T.C. 891, denying exemptions from income tax, claimed under Section 101(3) and (9) of the Internal Revenue Code of 1939, 26 U.S.C. § 101(3, 9).*fn1 Neither of them filed an income or excess profits tax return for any of the taxable years involved, 1945 through 1950.
The Post petitioner was and is a member post of the Polish Army Veterans Association of America, Inc. The latter's active membership consists of exsoldiers of the Polish Armed Forces who served during World War I or II and the children of members if they served in the armed forces of any of the Western Allies. Honorary members are also permitted. The constitution of the Association provides for rendering financial aid to sick and infirm ex-soldiers of the Polish Army and their families; war invalids have first priority for aid and then come active members. The by-laws, in addition, cover specified death benefits. In 1949, the Commissioner ruled the parent Association exempt under Section 101(8).*fn2
The Post was admitted to the Association in 1934. In its constitution it stated that its purposes are:
"* * * To maintain in an association or club for the mutual benefit, advantage and enjoyment of its members, by means of legitimate entertainments and social gatherings; to promote, foster and encourage the interests, welfare and improvement of all ex-servicemen and women, and their auxiliaries; * * *"
The constitution called for three types of members; active, honorary and associate or social. The latter paid yearly dues of one dollar. The active members' dues were four dollars plus and the Post paid over most of the money so collected to the Association. During the critical years the Post operated a bar in its club rooms; its principal source of income. In that period it paid out small sums in sick, disability and death benefits and for funeral expenses of active members. The Tax Court found as a fact that the amounts of the benefits depended largely upon the receipts from the bar operation.
The Post's third class of members (social) is peculiar to it. The parent Association has no such group. The social members are not eligible to hold office. They were not paid any of the mentioned benefits nor did they receive, as active members did, similar payments from the Association. The reason for taking in this group was to obtain much needed help for the Post in an effort to continue its existence.
The second petitioner, the Home Association, was formed under the Pennsylvania Non Profit Corporation Law, January 30, 1945. The Post's active members became its sole members. The Home Association by-laws set out its aims as follows:
"(a) To maintain a Home which shall be a suitable meeting and recreational center for the benefit, advantage and enjoyment of its members;
"(b) To promote the welfare and interest of its members and of all ex-service men and women;
"(c) To aid, assist and advise in developing a more intelligent and serviceable citizenship."
The Home Association acquired a building in March 1945, which it rented to the Post, commencing August 1945, as a home, headquarters and club rooms. In 1947 it obtained two adjoining buildings which it rented to various members of the Post.Most of the Home Association income was derived from coin machines which it operated in the Post club rooms, and from rent paid by the Post and the tenants of the two said buildings. It received some donations, a few loans and sold building bonds. The loans and bonds were largely paid off by 1950.
The Tax Court found as a fact that neither petitioner was operated exclusively for pleasure, recreation or social ...