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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My family has created a bank account for raising money ...

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My family has created a bank account for raising money for a sibling who has nearly lost her home in a flood. We are raising money via a Web site that I created I am reading the IRS guidelines for qualifying for 501C(3) status so donations are tax deductible. However, I am not certain if this is considered a public or private organization and not certain how to setup the organization (corporation, LLC, Association or Trust). Can you help me?


Unfortunately the circumstances you have described would not qualify you to establish a 501(c)(3) organization. The IRS regulations state:

"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."

What you are proposing to set up would be for private interests and for the benefit of one private individual and would not qualify as a 501(c)(3). Therefore any donations that were given to your foundation would not qualify as a tax deduction by the donor.

We find this same type of question come through the forum from a number of people who are trying to establish funds to help someone in need, but unfortunately these are the IRS rules.

Sorry, wish I could have given you a better out look on this.

If this was helpful, please press the Accept key.

Thanks, XXXXX XXXXX luck to you in your fundraising.

Merlo and 3 other Tax Specialists are ready to help you
Customer: replied 9 years ago.
The answer that I received put closure on an issue that has been nagging my family ( for weeks . I was not at all surprised by the answer but feel my money was well spent.

Thank you,

I hate giving people news that I know they don't want to hear, especially in a situation like this. But hopefully you will still get enough people who are caring enough to donate to your cause. Good luck.