"buddy" <buddyboy[at]idcomm.com> wrote:

- quote -

maybe you could find another charity that would could go
forward with the work you have already done???

Beth

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

buddy wrote:

- quote -

Corporations can get a tax deduction if they donate through
a qualified charitable organization, which you are not. In
fact, they have more restrictions on contribution deductions
than you have. 10% limit vs. 50% limit for individuals.

--
Frederick E. Jorden http://Tax-Accounting-Payroll.com
7825 Midlothian Tpk - 207 Richmond, VA 23235-5247
EMAIL knowtax[at]bigfoot.com
(804) 320-6210 FAX (804) 320-6211

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

I just want to thank everyone who posted to my questions.
I've realized we will have to forget doing this. I should
have checked into this first. All month in our "spare" time
we've been busy recording, get copyright permissions, using
recording software and mixing/mastering software, graphics
software for the cover art, checking into
replication/packaging, etc. It is really a big
disappointment. We just wanted to do our small part to help
in my wife's country and the other countries. It just seems
unfair that corporations can donate from their activities
and deduct the full amount, and get positive recognition
(rightly), but individuals would be punished for doing the
same thing on a smaller scale.

Again, thank you all for taking the time to read and post,
even if it wasn't the answer we wanted.

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

"buddy" <buddyboy[at]idcomm.com> writes:

- quote -

Well, if you call the expenses of producing the CD's
punishment, so be it. You can't do what you want to do,
which is make a charitable contribution without anything
coming out of your pocket. Sorry.

Phil Marti
Clarksburg, MD

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

buddy wrote:

- quote -

I've read all your responses above so I know how it appears
to you.

Fact is, if you make a product and sell it at a profit,
then that profit, no matter what you do with that profit,
IS income taxable. On each and every compact disk you sell,
no matter that you "plow" the proceeds back to produce more.

First, the income is "income taxable" and secondly, if
over 433$, it's social security (self employment) taxable.

And that's the will of the U S Congress.

ChEAr$,
Harlan Lunsford, EA n LA
Fri 21 Jan 2005

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

"buddy" <buddyboy[at]idcomm.com> writes:

- quote -

Then you're out of luck. Because the way I (and others)
have described it is the way the law works. You *will* have
to pay self-employment tax on the profit, even though you
donate it, and if you don't/can't itemize, you *will* pay
income tax on the profit, even if you donate it.

That's just how it is, like it or not.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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

I thought about something like this, and it's the best ( and
only do-able) answer I've seen yet. But a couple problems:

1. This would be distributed thru local churches (the cd is
Gospel songs). It would be a hassle for people to write 2
checks. It's an impulse purchase and I woulg guess most
purchases would be cash.

2. If sales had a "bubble" we would need to use the initial
purchases money to press more CDs, and give the money to the
Red Cross at the end as sales tailed off.

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

Phil Marti wrote:
- quote -

Ok I understand the buyer could not take deduction, I don't
think this would hurt sales since profit is going to the Red
Cross.

We could not do this if we would be punished by having to
pay any extra tax from it. We don't have have itemized
deductions so no Sch A. We just want to do something good
without being punished for it. We don't have the money to
pay all the expenses ourselves and donate the cds to thr Red
Cross, and I'm sure the Red Cross doesn't want to get
involved in selling cds, they just want donations. We would
do all the work to promote and distribute thru local
churches (it's Gospel songs).


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

Mike Lewis wrote:
- quote -

Ok I understand from your post and others the buyer could
not take a deduction. I don't think that would hurt sales
since the buyer would know profits go to the Red Cross.

But we can't do this if we would be punished for it by
having to pay any self-employemt or other tax. We don't
have any itemized deductions so no Sch A. I can't find a
form for a charitable project. The CD is Gospel songs and
would be distributed thru local churches but they would not
want to get involved in the accounting and divvying up
profit vs expenses, just collect the money (which would
probably be mostly in cash), turn it over to us and get a
new batch of CDs, we use the money to press more CDs, etc.


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

Harlan Lunsford wrote:
- quote -

OK, I understand from your post and others that buyers can't
get a deduction. I don't think that would hurt since buyers
still know profit goes to charity.

But we can't do this if we would be punished for it by
having to pay social security or any other tax from it. We
don't have the money to just send donations ourtselves. The
whole purpose is to do something good we would not otherwise
be able to do, and not be punished for it, but I can't find
a form for a charitable activity. We don't have itemized
deductions to do Sch A.

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

Paul A Thomas wrote:
- quote -

OK, I undersrtand from your post and others that buyers
can't take a deduction. I don't think that would hurt sales
since buyers know profits go to charity.

But we can't pay self-employment or any other tax on income
we never intended to keep. We can't file Sch A because we
don't have any itemized deductions. We just want to do
something good without being punished for it, but I can't
find a form for a charitable project.

I'm sure the Red Cross would not want to get involved with
being part of what you described. They just want the
donations, not to be part of a business. I would guess most
of the sales would be in cash. The CD is Gospel songs and
we would distribute through local churches.

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

Rich Carreiro wrote:
- quote -

Ok, I understand from your post and others, to forget about
the idea that the purchaser could deduct anything. I don't
think that would put off anyone from buying it since they
would know the profit is going to charity.

But we don't want to pay self-employment tax when we never
intended to make anything for ourselves. And we can't
deduct anything on Sch A because we don't file one, we don't
have any itemized deductions. We just want to do something
good and not be punished for it. It's not really a business
anyway, we don't intend to profit. But I can't find a form
for a charitable project.

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

<buddyboy[at]idcomm.com> wrote:

- quote -

How about telling people you'll sell them for $4, and they
should include with their order a check payable to the Red
Cross for $6? That way, you're clearly getting $4 (hence no
taxable income since that's your cost), the Red Cross gets
$6, and the $6 could be deductible by the purchaser.

Seth

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

buddyboy[at]idcomm.com writes:

- quote -

If you sell the CD's, you have $6.00 of income for each one
sold. You'll also owe self-employment tax on your net
(before donation) proceeds. You'll then have a $6.00 per
unit charitable contribution deduction on Schedule A.

If you want to avoid the tax implications, produce the CD's
and donate them to a charity to sell directly. You'll have
a Schedule A contribution deduction equal to your
out-of-pocket expenses.

- quote -

People buying directly from you would have no charitable
contribution to deduct.

Phil Marti
Clarksburg, MD

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

<buddyboy[at]idcomm.com> wrote:

- quote -

Unless you have formed a charitable organization, YOU are
not a legitimate receiver of funds given to charity....ie,
people paying you could NOT deduct it as a charity gift.
(therefore NO to #2). As you stated it, you would be
perceived to have earned $6 of self-employed income. Then
when you give that $6 to another entity, it TOO would have
to be a legitimate charitable organization for you to get an
itemized deduction on it (which by the way would not reduce
your SE income....at least thats the worst case
scenerio)....

You might think in terms of providing this good service
under the umbrella of a charity like your church or other
charitable org so the checks are made out to it rather than
to you.

Mike Lewis, CPA

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

buddyboy[at]idcomm.com wrote:

- quote -

Assuming you don't go off the deep end and incorporate and
thus further complicate matters, looks like you'll have a
6$ profit on each to pay tax on. UNLESS you itemize
deductions and can therefore deduct your profits as
charitable contributions. Whether you even qualify to
itemize is a difference thing however.

- quote -

No way. Not even the 6$.

- quote -

Worse case scenario, if you have a 1,200$ profit (6$ profit
times 200 disks sold), you'll wind up paying perhaps no
added income tax (this of course depends on your other
regular income) but will pay social security tax which
could cost you maybe....$ 178. or thereabouts.

If a client asked me about this, I'd say "forget about it",
and just send your donations to a recognized US charity.

ChEAr$,
Harlan Lunsford, EA n LA
Sat, 8 Jan 2005

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

buddyboy[at]idcomm.com wrote:

- quote -

If you treat this as a business, and maintain the proper
records, it seems like the costs would be your business
expenses, and you would be taxed on the net income. But
since you're donating the net to charity, you'd be able to
deduct it, and the result will be zero income and zero
taxes.

- quote -

They could only do this if you were a registered charity.
In that case, the CDs they receive would be like the
promotional gifts that public radio/TV gives away to their
donors. They would be able to deduct the difference between
their donation and the value of the promotion.

But I don't think *both* of you can get a deduction. Either
you're a charity, and don't pay any taxes to begin with, and
they get the deduction, or you're a business that they buy
from and you get a deduction when you send the profits to a
charity.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA

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

<buddyboy[at]idcomm.com> wrote

- quote -

Yes, you would have to include your profits on the CD's sold
in your income, and then, on Schedule A, claim the
charitable deduction for the amount paid.

- quote -

You aren't a charity, so no, you can't promote the CD in
this manner (it is most likely a fraud to do so).

- quote -

Consider working with the charity of your choice, to sell
them the CD's ~they~ sell in a charitable effort at your
cost (what $4 each?). That way the buyer writes a check to
the charity for $10, gets the CD, you get paid your costs
($4 each), and the charity gets their contribution ($6
each). I believe that under a Revenue Ruling, that since
the CD cost/value is already $10, there isn't any charitable
amount in the purchase price, unless you claim that your CD
is only worth $4, then the buyer gets a $4 CD and makes a $6
charitable contribution.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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

buddyboy[at]idcomm.com writes:

- quote -

That won't happen. You can't deduct the charitable donation
as an business expense. You'll have to take the $6 per CD
as income, pay self-employment tax on it, then take a
charitable deduction on Schedule A, assuming you can itemize
your deductions in the first place. So at best you'll wipe
out the income tax on the $6 per CD profit. But you'll
still be stuck with the self-employement tax on it.

- quote -

No. They are giving money to you. You are (presumably) not
an IRS-recognized charitable organization.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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

My wife and I want to produce CD's to sell to raise money
for the recent earthquake relief efforts. (she's
Indonesian). We would sell them for $10, and should be able
to clear $6 + on each one to donate to the Red Cross'
international relief fund. But I have some concerns:

1. We want to be sure we don't end up having to pay any
taxes from this, that if we keep receipts for the expenses
the irs won't try to make us pay tax on the gross proceeds
instead of the net receipts, which would be zero (after the
donation)

2. Can we promote that people who buy the CD can deduct (
$10 or $6 ? ) as a charitable contribution ?

3. Any other tax "pitfalls" to be aware of/plan for?

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