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Old 02-07-2009, 01:00 PM
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Legalities of Huge Charity Donation

Hi there,

I'm hoping a few of you can help me. I have had this fabulous idea that will raise tons of money for a charity. I now have selected a fellow-artist to be a partner. We will receive no money for our services, but will have to hire two professionals in another area of expertise. My questions are:
1) do we need any type of tax number or anything on paper (other than the contracts I will be using for everyone) if we eventually collect thousands (and above?) dollars on this for this charity?
2) can I draw up a contract for the two professionals stating that they will get say 1/3 of the donations for their work, or something to that effect? I am on a fixed income and cannot afford a lawyer right now. But, this charity is so very important to me personally.

I copied down contract forms from the internet and plan to add, delete or change any lingo that may/or may not apply to our situation. We feel that this is going to really be big and have already begun our initial preparation.
So any advice you can give would be wonderful, since I have never done anything to this 'possible' magnitude for charity. My main concerns are taxes, if any, and how to word any profit for the two professionals we will need. Any advice is welcomed.

Thanks so very much to anyone who can help. We am anxious to get this going. Gip7
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Old 02-07-2009, 01:58 PM
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ejtupi ejtupi is offline
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Re: Legalities of Huge Charity Donation

You don't really make it clear if the only "charity" here is the one you plan to contribute to. Nor do you make it clear what form of business you plan to operate. If you are actually forming a general partnership, even if you plan to distribute all net proceeds to a registered 501 (c) non-profit, you and your partner will be taxed on any net income. If you want to be a non-profit yourselves, you'll need to get an IRS determination letter.

You would do well to consult either a CPA skilled in non-profit taxation or an attorney who has that expertise. Just because you give away anything left over after paying consultants doesn't mean that you can take full deductions for the cash contributions. You can probably pay the "professionals" any amount you want for their services, since that is merely a business expense.

You should also consult your local business licensing authorities to determine the type of license you need. You might also have to obtain an Employer Identification Number from the IRS; for that, go to the irs.gov web site and do some research. I can't remember offhand, but it might be Publication 15 that you need to look at. You can download all IRS publications from the web or visit your local office to obtain printed copies. If you can't afford an attorney (who can!) you should be able to find out a great deal on either the IRS web site, your local library, or some of the "ask the CPA" web sites. This forum is probably not the best place to get reliable information.

Bear in mind one thing: The IRS publications are informational, but do not have the force of law. The tax courts have consistently ruled, amazingly enough, that you rely on IRS publications at your own risk. The ultimate authority will always be the Internal Revenue Code and regulations and the decisions of the tax courts and federal courts.

Even though you're anxious to start, laying the proper foundation can save you a ton of headache down the road. Best of luck.
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Old 02-07-2009, 03:56 PM
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Re: Legalities of Huge Charity Donation

Thanks Ejtupi for the quick response. However, I am now depressed. This has been a dream of mine for seven years since I am a cancer survivor. This is an art project involving a few other people. I just wanted to pay back for the time I've been given and hopefully prevent others from getting this cancer. But, I am on a very low, fixed income at the moment to the point that my children think I'm crazy when I could use money right now. But it's my passion at the moment.
As for the business end, I didn't realize how involved this was going to be, but still want to do it, so I will check out the info you have given me.
What if there were no one paid and everyone involved did it just for charity? Would there have to be taxes paid on that donation? Would that be as involved? Thanks again. Obviously, I need all the help I can get at this point. JC.gippy
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Old 02-07-2009, 04:01 PM
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Re: Legalities of Huge Charity Donation

Ejtupi: Sorry, I forgot to add that this is a one-time donation. I do not particularly want to form a 'business' or partnership. I mentioned partner in the sense that I found another artist who is willing to donate her time (a few weeks) and talent for help me with this project. It should take a few months to create, then market and sell. Of course, if and when we get to the selling point, I'm sure there will be tax issues, but up until that point if there is no money involved, do we really need to call it a business legally? Again, much thanks.
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Old 02-08-2009, 06:35 AM
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Re: Legalities of Huge Charity Donation

My concern for you is that if you collect moneys then that will be seen as income for you, even if you turn around and give it to charity. In the USA there may be limits on how much of your income you're allowed to claim as charitable deductions?

I'd suggest you speak to the charity. Most charities have systems in place for fundraising and know the ropes with these sorts of things. They might be able to help you do it through them, so that the money gets to them in the easiest way.

Tina.
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Old 02-08-2009, 01:45 PM
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Re: Legalities of Huge Charity Donation

Good point, Tina. The non-profit might be able to incorporate JC's idea into its own fundraising efforts without creating a tax headache.

JCGippy: Please don't be discouraged by some of the paperwork hassles that might be involved. As the saying goes, "An ounce of prevention is worth a pound of cure." Down the road a bit you'll be glad you laid the groundwork for your project. Temper your enthusiasm with patience, and I predict a wonderful result for you and those whom you hope to benefit. I wish you all the best in this.
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Old 02-13-2009, 01:58 PM
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Re: Legalities of Huge Charity Donation

Hi Ejtupi and Tina: Wow, great idea! I was afraid to contact the organization in fear that they would steal my idea since I'm sure they could put this together in a very short time with their contacts. But, maybe they will sign a form of nondisclosure before I get the total idea with them?

I would like to do this with 'everyone' involved (professionals) doing it just for charity with no exchange of monies. Two of us have agreed to that already, but there will be two other professionals -- one of whom is family and will probably be okay with that, but the other not someone I even have yet. If we could do that, we could then have each person who buys this product (knowing that it is for charity and which charity) will have that money sent in 'their name' (not ours) to the charity and receive a receipt for tax purposes. I'm hoping that is possible. I do not need to benefit at all from this, just be a part of it.

I have contacted a lawyer friend of mine from years ago and he will be getting back to me today. He was on his way home from an appt. when he returned the call. So, hopefully, he will be able to help with all that I've written down from you. I will also contact the organization this afternoon and 'feel them out.' Thanks so very much for your input. It make me open my eyes wider and realize this isn't going to be so easy, but it's my dream so I'll hang in there. Take care, Gip
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Old 02-24-2009, 03:14 PM
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Re: Legalities of Huge Charity Donation

It'd probably be easier for you to donate the work to the charity for them to sell. If you sell a piece you need to claim it as income, and then to donate it means there's a loss. You can give a painting for example, help them to sell it, and from what I understand the govt won't need to get their share because charities don't pay taxes the same way.

You could still mix it with some works of your own or something, like doing a big show but selling a few pieces for a given charity. The charity gets the piece conditional on letting you then sell it.

If it's a big charity it may be run by a board, and so your fundraising idea will not likely be stolen or incorporated.
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