Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 56-7

1956-1 C.B. 675

Caution: Obsoleted by Rev. Rul. 69-227

IRS Headnote

Dancing facilities operated and maintained by a city as part of its regular recreational program constitute facilities for physical exercise within the meaning of section 1701(d) of the Internal Revenue Code of 1939, and charges for admission thereto are exempt from admissions tax if the proceeds therefrom inure exclusively to the city.

Full Text

Rev. Rul. 56-7

Advice has been requested whether dancing facilities operated and maintained by a city as part of its recreational program constitute facilities for physical exercise within the meaning of section 1701(d) of the Internal Revenue Code of 1939.

The city sponsors weekly community dances in its local civic auditorium for the purpose of providing a wholesome environment for dancing for its young people. The dances are supervised by officers appointed by the city officials and are supported, in part , by the taxpayers of the city. Charges for admission to the dances are held to a minimum in order to encourage the young people to attend. All proceeds from such affairs inure exclusively to the city.

Under the provisions of section 1701(d) of the Code no tax attaches to any admission to swimming pools, bathing beaches, skating rinks, or other places providing facilities for physical exercise, operated by any State or political subdivision thereof or by the United States or any agency or instrumentality thereof if the proceeds therefrom inure exclustively to the benefit of the State, political subdivision, United States, agency, or instrumentaltiy.

Senate Report No. 781, Eighty-second Congress, C.B. 1951-2, 458, at 538, indicates that Congress intended to limit the benefit of section 1701(d) of the Code to activities which are appropriate for the Government to encourage, especially if those activities are Government supported. Further, the Report states, at page 592, that the exemption provided by section 1701(d) of the Code is intended to apply to `admissions to facilities for physical recreation.'

In view of the provisions of law and the expressions of intent found in the Sentate Report concerning the exemption provided by section 1701(d) of the Code, it is held that dancing facilities operated and maintained by a city as a part of its recreational program for the purpose and in the manner described above constitute facilities for physical exercise within the meaning of section 1701(d) of the Code, and charges for admission thereto are exempt from admissions tax if the proceeds therefrom inure exclusively to the city.