- quote -

Wouldn't you end up being a private foundation?

Josh

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- quote -

You can do that, as long as the organization has a
legitimate charitable purpose. There may be some state
requirements, though.

- quote -

That only works to the extent the girls created a for-profit
organization. If it's a nonprofit, giving the proceeds to
their parents is not a proper charitable purpose.

- quote -

I have some doubts that minor kids can legitimately give
money to their parents - it's like a conflict of interest on
the parents' part.

Aside from that, I don't see a problem with it.

Stu

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Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:
- quote -

Remember that there are two kinds of charitable
organizations. As long as they're not trying to take in
tax-deductible contributions, I don't see why not.

- quote -

Thanks. I didn't remember that.

Stu

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- quote -


- quote -

Besides, they were selling a product. Just make sure you
don't pay more than $250 for a lemonade ;-)

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Stuart A. Bronstein wrote:
- quote -

You work for the IRS, don't you?-!

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"Rich Carreiro" <rlcarr[at]animato.arlington.ma.us> wrote:

- quote -

actually, yes it does. Check your state law.

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- quote -

Kiddie tax applies only to investment income, not income
from working or running a business. And only interest and
dividends can go on the parents' return. If the child has
any other type of income, she has to file her own return.
The interest and dividends are never REQUIRED to go on the
parents' return. That's just an option to reduce the
paperwork a little if the child has no other income. The
child's investment income is taxed at the parents' rate,
whether it is reported on the parents' return or a separate
return for the child. If they do choose to put the child's
interest and dividends on the parents' return, that doesn't
make it the parents' income. It still belongs to the child.

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Stuart A. Bronstein wrote:
- quote -

The form is Form 1023, and it only needs to be filed if your
receipts are greater than $5,000 in a tax year. Of course,
if you want to get the IRS letter acknowledging your 501(c)3
status, you file the form.

- quote -

No. There is nothing in the law that REQUIRES a child's
income to be reported on the parents return. The Kiddie tax
only requires that investment income over $1600 be taxed at
the parent's tax RATE, but on the child's return. See form
8615 for how to calculate the tax.

Since selling lemonade is not an "investment", the point is moot under
these circumstances.

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- quote -

Kiddie tax applies only to investment income, not income
from working or running a business. And only interest and
dividends can go on the parents' return. If the child has
any other type of income, she has to file her own return.
The interest and dividends are never REQUIRED to go on the
parents' return. That's just an option to reduce the
paperwork a little if the child has no other income. The
child's investment income is taxed at the parents' rate,
whether it is reported on the parents' return or a separate
return for the child. If they do choose to put the child's
interest and dividends on the parents' return, that doesn't
make it the parents' income. It still belongs to the child.

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- quote -

Well you sure fooled me.

- quote -

Not talking about the last four items of course. Just a
charitable organzation.

If this is so, and anyone can form a "charitable
organization", then I hereby found "Myself" as a charitable
organization, and will use any and all donations for my
favorite charity. (Guess!)

(snipped)

- quote -

Nowhere did I hint that the gift would be a "conduit", only
that they would give the money to their parents, with
perhaps a simple request that the amounts be forwarded.
However as we all know, to be a gift, no strings should be
attached.

I stand by my three stage scenario as being completely above
board and legal.

ChEAr$,
Harlan Lunsford, EA n LA

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Stuart A. Bronstein wrote:
- quote -

Okay, for IRS filing requirements, you're probably right.
But surely, something, somewhere, prevents 3 little girls
from being a charitable organization. An organization must
be a bit more formal methinks.

- quote -

You're thinking of investment income. this is business
income.

ChEAr$,
Harlan

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> writes:

- quote -

No. The "kiddie tax" applies to investment income, not
earned income.

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

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- quote -

I am absolutely serious.
- quote -

neither IRS approval nor the filing of IRS forms is required
to form a new charitable organization, a new partnership, a
new LLC, a new corporation, or a new individual taxpayer.

- quote -

common sense, and the law.

- quote -

If the girls gave the money to their parents as a "gift", it
is absolutely wrong. If they gave the money to their
parents merely as a conduit to the Salvation Army, fine, but
the parents could not properly claim the deduction, as it
was not their money.

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- quote -

not all charitable organizations qualify as tax exempt or
tax deductible charities. But under state law, they must
fulfill their charitable purposes.

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Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:

- quote -

Actually, I think that's wrong. The last time I checked
(which was, admittedly, several years ago) you only needed
to file if the organization was going to take in a certain
amount of money (I think it was something like $5000 in the
first year, $15,000 in the first two years or $25,000 in the
first three years).

- quote -

Since the girls were 11, doesn't the kiddie tax for kids
under 14 require the money they earned to go on the parents'
return anyway?

Stu

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- quote -

Wrong: try donating to that "charitable organization" and
see if you can deduct it. You have a business that has
promised that its proceeds (or profits; not clear from the
post) would be donated to charity.

- quote -

Fortunately, it isn't a charitable organization.

- quote -

The three 11 year olds? But they don't have bank accounts,
which would make it hard for them to transfer the money
directly to the charity.

- quote -

Which is precisely what happened: the money went to
hurricane relief, via the parents' bank accounts (the only
effective way to get it there).

Seth

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- quote -

Wow! thanks for the attempt at humor.

Three little girls banding together cannot even BE a
charitable organization unless they file and receive IRS
approval. Only then would the money raised belong to a
charitable organization.

How on earth did you arrive at your "opinion"?

Anyway, for the middle step not to be "fraud (as you put
it)" the girls would need to understand the consequences of
their action, i.e. giving the profits to the parents so they
in turn could give to the Salvation Army. It's a good
opportunity for teaching kids a valuable civic and tax
lesson.

ChEAr$,
Harlan Lunsford, EA n LA

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"123go" <rejecto[at]rejcet.ccc> writes:

- quote -

Just how were these three kids selling lemonade a
"charitable organization"? Saying that "the
proceeds/profits of what I'm selling go to charity" does not
make one (or one's business) a "charitable organization"

- quote -

Again -- where do you get the idea the kids were a
"charitable organization"?

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

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- quote -

The above reply is false, as it stems from the erroneous
assumption that three girls with a lemonade stand is a
"charitable organization" and not a business. It isn't a
charitable organization (able to accept deductible
contributions) unless the IRS says it is (under section
501(c)3 ).

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- quote -

wrong, you have a charitable organization, not a partnership.

- quote -

that's called fraud. A charitable organization cannot just
gift away its funds.

- quote -

again, fraud. that is not their money, it belongs to the
charitable organization, which must do its intended charity
with it - i.e. give to hurricane relief.

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