TaxSrv <n3_eu[at]comcast.net> wrote:

- quote -

Art is attempting to differentiate contributions from income received from
running a business. Nonprofits are in business, generally, regardless of
whether UBIT applies.

Ticket sales of a symphany orchestra are business income. Book sales of a
nonprofit publisher are business income. Subscriptions of a nonprofit magazine
are business income. If this cat rescue charges adoption fees, that would be
its business income.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

TaxSrv <n3_eu[at]comcast.net> wrote:

- quote -

Those are in kind donations. Yes, you want to account for them to prove that
the the organization has public support and not just support from
disqualified persons. Remember, your goal is to prove that it's not a
private foundation. The burden is on the applicant.

- quote -

Yes. It's very difficult for a small entity to prove it's not a foundation
as so high a percentage of the donations will come from a small group of
people. Emphasize your plans for future fundraising that will gain you
significant support from the general public and not just your founders.

Will you be placing cats in homes? Will you charge fees for adoption as
many shelters do? If so, you may wish to look into the public support rules
under 509(a)(2) in lieu of 509(a)(1). But check both ways.

- quote -

You're still going to have to assign a market value to your
use of the shed as it isn't nominal.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

TaxSrv wrote:
- quote -

There are two possibilities - it's either a gift or it's
not. If it's a gift it's not income.

- quote -

A donation is a gift.

- quote -

If he took in the cats without an agreement that he would be
paid, any payment that comes later is a gift. Even if the
payment was contemplated when he took in the cats, to the
extent the payment exceeds the market value of his services,
it's also a gift.

- quote -

What's that a real-life example of? She's entitled to proof
that her contribution is deductible. I don't understand the
problem.

- quote -

The formality that's required is the same as for any other
corporation. Mostly that means keep your finances separate
and keep good track of income and expenses.

Stu

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Arthur Kamlet wrote:

- quote -

I'm not clear as to what rule you're referring to. What if
a check arrives the mail, payable to this nonprofit, with
"contribution" on the memo line? Even if unsolicted and the
org has no idea who this person is, I'm sure it's income.
If you're differentiating a donation vs. a gift to my client
as a person, then I agree. In fact, my client faces such an
actual situation, involving someone whose sister is a
partial heir to a pending, $51 million estate. She says she
will soon reward my client for taking in her cats, when she
became unable to care for them but has had little money to
date to give her. It's unknown if she intends personal gift
or donation. Nor amount! :-)

Another real-life aspect here is one very wealthy woman,
with a famous maiden name traceable to city founders 150
years ago, who had cumulatively donated about $2K in food.
She stopped doing so in a huff, threatening to report my
client to the state Attorney General. Reason: she wanted
absolute proof of (c)(3) status for her tax deduction, not
what sounds like weasel words to her in correspondence sent
to her.

Anyway, I thought that some actual details may be of
interest, and I was curious about any practitioners'
experience with very small (c)(3)s like this vs. IRS. She's
learning why IRS recognition is important, whether required
or not, but hasn't been bitten hard enough yet to operate
this org with the formality I think IRS expects.

Fred F.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

TaxSrv wrote:

- quote -

I've set up quite a number of (c)(3)'s. And yes, the IRS
can be picky. In fact, no matter how perfectly the
paperwork was done the first time, I have never had one that
was approved the first time. They have always come back with
some changes they wanted to the bylaws (yes, you must submit
them), even if they had to make up a rule to create
something that had to be done.

Stu

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

TaxSrv <n3_eu[at]comcast.net> wrote:

- quote -

If the donations are not solicited and used as you
described, I don't see how this would be treated as income.

But the donor doesn't get to deduct the gift if it;s not a
501(c)3).

- quote -

Yes, the IRS does insist on a number of itmes in your
bylaws, including in detail the exempt purpose, and
especially what happens to the funds if you go out of
business -- hint: the bylaws require the funds be turned
over to another 501(c)(3).

The IRS published a very useful guide Go to
http://www.irs.gov/charities/index.html
and then Supporting Organization Reference Guide.

- quote -

Under $25,000 income or expenses exempts her from filing a
990 though state laws might still rrequire filing. If she
gets a 990 from the IRS to fill out, she just writes Under
25,000 and signs and returns it.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Situation: Recently incorporated nonprofit -- a cat
rescue/sanctuary. 80% of revenues are donated cat food and
kitty litter, good bit of that from the elderly lady who
formed it, but she need no longer file a 1040 nor likely
ever will. It's a serious operation, with shed bldgs built
by her on her large, rural, wooded residential property.
There's several $thousand in annual donations of food and
some cash from the general public; no formal fundraising.

Question 1: Is there any IRS exception permitting a small
org to ignore accounting for small donations of things like
bags of cat food? I viewed some 990's of similar but larger
orgs who must file 990, but several clearly do not appear to
account for them, though their literature solicits such in
addition to cash. Physically accounting for it is a
laughable impracticality.

Question 2: I've gotten a small (c)(4) and (c)(7) through
IRS easy, but does IRS fuss more on tiny (c)(3)'s? How
detailed will they go into document requests? The 4
incorporators are unrelated, but they've never met to
install a Board; there's no bylaws. She could lease the
fancy sheds to the org for $1, if the 1st Board meeting is
ever called to discuss. I'm not about to tell IRS in Form
1023 about imaginary leases.

She's a friend, so no advice as though I will be compensated
is needed. The thing is bouncing around $$ wise, with SWAG
food included in gross, re the floor for even need to apply
to IRS, but she wants to. Answers to above 2 questions may
help me convince her to keep this reasonably managed under
$5,000 annual gross. Her own food contributions
"anonymously left at the driveway entrance" alone will do
that. She dutifully furnishes acknowledgments to others.

Fred F.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->