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SALE OF NON PROFIT CLUB

Customer Question

NON PROFIT CLUB, I BELONG TO IS BEING SOLD FOR 2.2 MILLION
24 MEMBERS, WHAT TAXES WILL WE HAVE TO PAY?
ALSO HOW MUCH EACH PERSON WILL HAVE TO PAY.
Submitted: 11 years ago.
Category: Tax
Expert:  Tammy F. replied 11 years ago.

Are you implying that the members will each be paid a share of the profits?


In your articles or incorporation and your bylaws (if you are a true 501(c)3) you should have had to detail the way that the assets of the group would be distributed if the group was ever disolved. In most cases, this cannot mean any profit for the members.


I think that you should go back and take a look at your bylaws and articles of incorporation. Then get back to me with what it says.


In mose cases, members cannot profit from the sale or disolution of a non profit group.


Customer: replied 11 years ago.
Reply to Tammy Falkner's Post: ARTICLE XXV DISBANDING OF THE CLUB
AT ANY MEETING CALLED TO ACT UPON A RESOLUTION
TO DISSOLVE OR DISBAND CLUB, ALL MEMBERS ENTITLED
TO VOTE SHALL BE GIVEN WRITTEN NOTICE AT LEAST 10
DAYS PRIOR TO THE MEETING AT WHICH SAID ACTION IS
PROPOSED TO BE VOTED ON. AT SUCH MEETING, THE QUESTION OF DISSOLUTION OR DISBANDING OF THE CLUB
SHALL BE SUBMITTED TO A VOTE AND MUST BE APPROVED
BY TWO THIRDS VOTE. (NOTE: THIS VOTE WAS APRROVED)
Expert:  Tammy F. replied 11 years ago.

Yeah.... but does it say what the method of disolution can be and if the members can profit.


Most non profits have to have a clause in there that says that the proceeds will be donated to a similar charity or another situation where the members cannot profit.


The reason for this is that non profits get grants and donations because they have a purpose that other people and groups believe in. Because the funding comes from the public, the members should not be able to benefit in the event of a sale.


So, in this case, none of the member would have to worry about taxes on their share because there would be none.


Does this make sense?


I founded and am president of a non profit. In the articles or incorporation and bylaws, it states that any assets or profits that are earned when the group disolves must be donated to a like charity.


You should have a clause that states this specifically.


Check your articles or incorporation to be sure.

Customer: replied 11 years ago.
THIS IS A BEAGLE CLUB, WHICH ALL MEMBERS PAY DUES
WE RECEIVE NO DONATIONS, WE HAVE FIELD TRIALS WHICH SOMETIMES COST US MONEY TO PUT ON. WE BOUGHT
THIS CLUB WITH MONEY FORM ANOTHER BEAGLE CLUB WE
SOLD IN THE 60'S. ALOT OF THE MENBERS HAVE PUT
MONEY IN THE CLUB TO KEEP IT RUNNING OTHER THAN
DUES.

Expert:  Tammy F. replied 11 years ago.

Is it a 501(c)3?


If it is simply a recreational club, the proceeds distributed to each member will be taxed at pretty much the same rate as your regular wages.


In that case, you don't have the same problem that you would if it was a non profit.


Let me know if you still have questions.

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