(a) General rule
An organization operated for the primary purpose of carrying on a trade or business for profit shall not be exempt from taxation under section 501 on the ground that all of its profits are payable to one or more organizations exempt from taxation under section 501.
(b) Special rule
For purposes of this section, the term "trade or business" shall not include—
(2) any trade or business in which substantially all the work in carrying on such trade or business is performed for the organization without compensation, or
(3) any trade or business which is the selling of merchandise, substantially all of which has been received by the organization as gifts or contributions.
1969—Pub. L. 91–172 redesignated first sentence of existing provisions as subsec. (a), and substantial portion of second sentence as subsec. (b)(1), and, in subsec. (b)(1) as so redesignated, inserted reference to section 512 of this title, and added pars. (2) and (3).