Gil Faver <Rowdy'sboss[at]ND.com> wrote:
- quote -

[girls sell lemonade, profits donated to charity]

- quote -

Even if the price paid for the lemonade is the fair market
value?

A for-profit partnership can be done quite informally (as
here); wouldn't a trust require some amount of legal work?

Seth

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote in
- quote -

I believe the proper treatment is as a charitable trust,
where all the income is treated as a charitable contribution
and fully deductible.

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

- quote -

Let's see if we're dealing with the same facts. I'll
simplify a little.

11-year old girl sets up a lemonade stand. She earns $400.
She gives that $400 to her parents, requesting that they
donate it to the Red Cross. They do so.

1. Her earnings of $400 don't cause tax liability (given
reasonable assumptions about her total annual income).

2. The gift to her parents doesn't create tax liability.

3. The donation by her parents to the Red Cross is deductible.

Seth

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"Gil Faver" <Rowdy'sboss[at]ND.com> wrote:
- quote -

I suppose you could say that. But then there's the issue of
whether selling lemonade is, itself, so linked to the
charitable purpose that it doesn't result in unrelated
business income.

Under the circumstances they're probably better off as a
for-profit that donates all its income rather than a
nonprofit that pays tax on its ubi.

Stu

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"Seth Breidbart" <sethb[at]panix.com> wrote:
- quote -

doesn't "a business organization which was pledged to donate
its profits (or proceeds) to charity" fit the broad
definition of "charitable organization"? If not, why? What
are the tax consequences of any difference?

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Gil Faver <Rowdy'sboss[at]ND.com> wrote:
- quote -

I still say they formed a business organization which was
pledged to donate its profits (or proceeds) to charity.
That's not the same thing.

Seth

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

from your original post: "and raised about 1200$ for
hurricane victims' relief".

sounds like they formed a charitable organization to me.

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

Well then, audit the parents. They're not entitled to a
thing, the cheap bastards.

Stu

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Stuart A. Bronstein wrote:
- quote -

I can see now my first post could have been clearer. The
girls sold lemonade which they made themselves. they had
purchased all the supplies, lemon, sugar, etc from local
grocery store using their own funds, hence their parents
were not initially involved.

ChEAr$,
Harlan

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sethb[at]panix.com (Seth Breidbart) wrote:
- quote -

That should be the rule - do you have any authority for it?

- quote -

They solicited contributions from their parents.

Stu

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123go <rejecto[at]rejcet.ccc> wrote:
- quote -

No, donations to an _unrecognized_ charitable organization
are not deductible. I doubt the three girls got a 501(c)(3)
ruling from the IRS.

- quote -

Did they solicit contributions? All I read is that they
sold lemonade.

Seth

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"William Brenner" <wbrenner[at]nospamplease.net> wrote:

- quote -

Thus the parents donated items to the charitable
organization, and can deduct the value of those items.

- quote -

as an unincorporated association, with the sole purpose of
charity. per Calif. Business and Professions Code 17510.2.
(d) "charity" shall include any person who, or any nonprofit
community organization, fraternal, benevolent, educational,
philanthropic, or service organization, or governmental
employee organization which, solicits or obtains
contributions solicited from the public for charitable
purposes or holds any assets for charitable purposes.

Thus, the girls formed a charitable organization

- quote -

if this were true, the girls violated their duty, as a
charity cannot gift away its charitable assets. To be
proper, the girls could use the parents as a conduit to get
the money where it belonged, but then the parents could not
deduct the money, as it was not theirs.

Think about the alternative - the girls formed a
partnership, solicited money in the name of charity, were
blown away by the amount of moeny they took in ($1200!), and
decided - screw the charity, lets buy smokes and liquor.
They could do that if they were a partnership, couldn't
they?

There is a reason there are state laws on the books dealing
with such charitable endeavors.

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Can we safely assume that the parents provided the capital
expended to purchase the lemons, the sugar, the cups and
even the water? They most likely also physically purchased
the raw materials at the grocery store. They might even have
participated in making the lemonade.

The girls, who thus had no monetary investment in the
project, volunteered their time and effort to market the
lemonade. They turned the resulting revenue over to their
parents, who then donated it.

Would this scenario result in a disallowance of the parents'
charitable deduction? Would this thread exist had the
parents sold the lemonade?

Of course, in today's legal climate, a hot-shot child
welfare person might charge the parents under child labor
and/or abuse laws.

On a personal note, I must add that, had I been one of the
parents, I would not have claimed a charitable deduction.
Not because I -- a confessed tax amateur -- necessarily
believe it to be illegal; but because I just would not feel
right in doing so under the circumstances.

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