Question for accountants...

[krcit]

Hi guys. I am hoping someone can help me with an answer. I have a friend who was diagnosed with leukemia a couple of months ago. We had a benefit for her and a foundation was formed in her name. Do they need to pay taxes on the donations she has recieved? They were told that they needed to form a foundation in order to not pay taxes and now they are being told conflicting things. I figured I would ask my smart Dissers if they know the rule. Thanks so much.

 

[allyphoe]

In general, fundraisers for a specific person are by definition not charitable. I can't come up with a scenario in which you'd be able to establish a charitable foundation to benefit one person.

I suspect whatever entity you formed is a taxable one. But you really need someone who specializes in that kind of thing, and who is local to you, to sit down and go over your organizational documents and any paperwork you've filed with, or gotten from, the state and the IRS.

This isn't the kind of situation where advice from people who don't have access to all the facts is going to be useful.

 

[krcit]

Thanks Allyphoe. That's kind of what I thought but since I know nothing about any of it I figured I'd throw it out there. I think her sister is going to mee with someone. Thanks for the info.

 

[Cheshire Figment]

The foundation has to be formed and approved as a Section 501(c)(3) organization for contributions to be deduictible to the donors. If the foundation is approved in any other subsection of 501(c) it does not have to pay tax on contributions related to the purpose of the foundation. If it not approved under 501(c) it is a taxable entity and must file and pay income taxes.

 

[allyphoe]

If the foundation is approved in any other subsection of 501(c)

Out of curiosity, can you identify any subsection that seems applicable to the OP's situation?

 

[krcit]

I'm sure that I'm showcasing my ignorance on this subject here but does it make a difference that donations can be claimed on your taxes?? This was all done in a pretty short timeframe since leukemia is a quick and aggressive cancer. From time of diagnosis to the fundraiser was 6 weeks.

 

[allyphoe]

It might make a difference to the people putting the money in. But it might not - I give outgrown stuff to my MIL, who hands them out to recent immigrant families, because I know they'll go to people who need them. I don't give to Goodwill unless MIL can't find anyone who needs the item, even though I could get a deduction for giving to Goodwill, but not for giving to MIL.