Theater,Inc.,an exempt organization,owns a printing company,Printers,Inc.,which remits 80% of its profits to Theater,Inc.Since Printers remits at least 80% of its profits to Theater,neither Theater,Inc.,nor Printers,Inc.,must pay income tax on this $80,000 ($100,000 *80%).

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Printers,Inc.,is subject to the regular income tax on its earnings of $100,000.Printers is classified as a feeder organization.Theater,Inc.,is not taxed on the receipt of the $80,000.