How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Lev Your Own Question

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22617
Experience:  Taxes, Immigration, Labor Relations
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

I have a friend with two young children who have cystic ...

Customer Question

I have a friend with two young children who have cystic fibrosis.... What is the best vehicle to set up so that friends, family, and acquantances from the general public can donate money to the kids: 1) so the kids don''t pay taxes on the money they receive, and 2) less importantly - so the people who donate can take a tax deduction. I have heard of non-profit LLC''s qualifying for 501c3 status, or private foundation status, or exempt/nonexempt charitable trust status, but are there any others that you would recommend instead? What''s the best to accomplish the goals?
Submitted: 6 years ago.
Category: Tax
Expert:  Lev replied 6 years ago.

I want to warn you that any donation that benefits a specific person may not be deducted as charitable contribution. Please see for reference the IRS publication 526 - http://www.irs.gov/pub/irs-pdf/p526.pdf If you would take a donation from people - you should not mislead and provide the correct information this matter.

The answer on the first question depends how you earn the money. If the money coming as gifts - the gift is not taxable income for the recipient. However if the amount is above $12,000 (for 2008) per person per year - the donor would be required to file a gift tax return (there will not be any gift taxes unless the lifetime limit of $1,000,000 is reached) - if the donor pay directly to medical facility for the treatment - such a gift is not taxable despite its amount.

If the money would come as income from some business activity - selling goods, providing service, etc - you may want to set-up a non-profit organization and ask for exempt status - so such profit will not be taxable. You will also need exempt status if you purchase any goods (for instance a pizza for fund raisers) and want to save some money on the sales tax.

If you plan to solicit donation s from general public - please be aware that the Tennessee Charitable Solicitations Act requires that charitable organizations who solicit contributions directly or indirectly from, or within, the State of Tennessee register, unless exempt from the registration requirements. Organizations that are exempt from the registration requirements of the Act include bona fide religious institutions; educational institutions and supporting organizations composed of parents of students and other persons connected with the institution, which are organized and operated for the purpose of conducting activities in support of the operations or extracurricular activities of such institutions; volunteer fire departments, rescue squads and local civil defense organizations; political parties, candidates, and Political Action Committees; hospitals; and organizations that receive annual contributions less than $30,000 from the public. Groups that are exempted purely because they receive annual contributions less than $30,000 are required to complete and file an "Exemption Request" form with the division. - http://www.state.tn.us/sos/charity/chforms.htm

The Tennessee law provides "Catastrophic Illness Trust" as the option for your situation - it is defined as a trust or custodial account established to benefit those with a catastrophic illness, or a severe illness requiring prolonged hospitalization and/or doctors and medicines. Trustees or a bank or trust company acting as trustee are required to provide notice to the Division of Charitable Solicitations on establishment of the trust. This notice is required before soliciting donations in the State of Tennessee. - http://www.state.tn.us/sos/charity/catastrophicAct.pdf

The trustees, other than a bank or trust company acting as trustee, are also required to file with the Division of Charitable Solicitations an annual accounting of the trust on the anniversary of the establishment of the trust. This accounting must include all revenue and expenditures of the trust. The trustees must keep true and accurate financial records of the trust for no less than three (3) years. In addition, the Secretary of State may compel additional production of documents, exhibits, or things by any person which the Secretary believes to be pertinent in conducting any investigation.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22617
Experience: Taxes, Immigration, Labor Relations
Lev and other Tax Specialists are ready to help you
Customer: replied 6 years ago.
1) If we set up a Catastrophic Illness Trust in TN, can we then also qualify the Trust as a 501c3 organization? We will definitely be deriving more than 80% of the income for the public through small donations (less than $500) from activities like selling pizzas and raffle tickets, etc. However, all the money would go to benefit the two children. 2)would we have a better chance to qualify as a 501c3 if we gave 50% of the money to the kids and 50% of the money to the National Cystic Fibrosis Foundation?
Expert:  Lev replied 6 years ago.

a Catastrophic Illness Trust is a different structure from a 501c3 organization. If you are planing raffle or other gaming activities - you must have a 501c3 organization and must have an IRS determination letter, and must obtain a notice of authorization from the Division of Charitable Solicitations - see additional information - http://www.state.tn.us/sos/charity/gaming/index.htm or contact the Division of Charitable Solicitations at(NNN) NNN-NNNN/p>

To qualify for 501c3 status - the organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual. Thus if you create the organization to benefit specific persons - ever partly - you would likely get rejected by the IRS.

Please also see for reference the TN law Fundraising for Catastrophic Illnesses. - http://www.michie.com/tennessee/lpext.dll/tncode/ca7d/cd6f?fn=document-frame.htm&f=templates&2.0#

Customer: replied 6 years ago.
Thank you for all of your help!
Expert:  Lev replied 6 years ago.
Appreciate you for accepting the answer. I wish you the best.

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.