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Thomas McJD
Thomas McJD, Attorney
Category: Legal
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Experience:  Legal Expert
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I am launching an apparel business and Id like 25% of all

Customer Question

I am launching an apparel business and I'd like 25% of all profit to be given to performing artists for their work. I'm not interested in launching a 501c3 alongside the apparel business... Is it possible to give away money to individual artists/companies and claim it as a tax exemption as a sole proprietor? What about having another 501c3 house the money and then from there, distribute it? For example, Dance Apparel donates 25% to Dance Umbrella 501c3, Dance Apparel in conjunction with Dance Umbrella disperse funds to artists, Dance Apparel claims the 25% as a tax deduction? Is that feasible?
Submitted: 4 years ago.
Category: Legal
Expert:  Thomas McJD replied 4 years ago.

TMcJD :

Hi, I will be happy to assist you, and it is my goal to make you a very satisfied customer! This may take a few minutes, so thanks for your patience.

JACUSTOMER-agku42n2- :

Sure.

TMcJD :

Unfortunately, you cannot take a tax deduction for such donations unless the entity to whom you give the money is a tax-exempt organization -- like a 501(c)(3) or a church. This is because it's not a business expense that is tax deductible (unless you can legally justify paying the artists as some form of advertisement or other business expense).

JACUSTOMER-agku42n2- :

So then the second model I suggested in the question would work? "For example, Dance Apparel donates 25% to Dance Umbrella 501c3, Dance Apparel in conjunction with Dance Umbrella disperse funds to artists, Dance Apparel claims the 25% as a tax deduction?"

JACUSTOMER-agku42n2- :

Then is this model suitable: "Dance Apparel donates 25% to Dance Umbrella 501c3, Dance Apparel in conjunction with Dance Umbrella disperse funds to artists, Dance Apparel claims the 25% as a tax deduction?"

TMcJD :

Sorry, I had to step away one moment. Let me take a look at your replies and I'll respond in a just a few minutes.

TMcJD :

Yes, the for profit could donate funds to a 501(c)(3) and take a deduction. The 501(c)(3) could then disperse funds according to its missions and purpose. But you need to be very careful in this area. It would pay dividends for you to speak to a local tax attorney in setting up any 501(c)(3) so you can avoid any issues with control, tax-exempt status, etc.

TMcJD :

I don't see any issues with your proposal, but again, you need the assistance of a local tax attorney just to check everything. You don't want to think you've done it correctly and then get hit with a huge tax bill later.

TMcJD :

Let me know if I can provide clarification or additional information.

TMcJD :

If not, please leave me a positive rating so I can receive credit for my time assisting you.

TMcJD :

Thanks and have a great day!

Expert:  Thomas McJD replied 4 years ago.

Why did you rate my service as poor? I would be happy to further assist you if you can let me know how the answers I provided were "poor service." Thanks.