Rensselaer Polytechnic Institute v. Commissioner of Internal Revenue

GEORGE C. PRATT, Circuit Judge:

The issue before us is not only one of first impression; it is also of considerable financial significance to many of our colleges and universities. When a tax-exempt organization uses one of its facilities, as in this case a fieldhouse, for both tax-exempt purposes and for the production of unrelated business income, what portion of its indirect expenses such as depreciation may it deduct from its unrelated business income pursuant to I.R.C. § 512 (1982)? May it allocate those expenses, as prescribed by Treas.Reg. § 1.512(a)-l(c), on any “reasonable” basis? Or…