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Do you all answer non-profit tax questions? we are a non…

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Do you all answer non-profit tax questions?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

We are a non profit and a vendor has offered to pay a bill for us. Is that a tax deductible donation?

Accountant's Assistant: Is there anything else the Accountant should be aware of?

The money will never hit our bank. the vendor will write the check to the bill collector directly.

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Answered in 24 minutes by:
4/24/2017
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,677
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi. My name's Lane.

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Just doing this and taking the deduction would NOT be advisable.

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For donations of goods, one would need a letter from the organization acknowledging the donation. That might be one way to legitimize for the individual. (And if you do this you'd still need to account for the inflow and the offsetting expense if you're going to legitimize this).

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You'd probably want to account for this as a restricted donation.

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Which brings up the best practice here. Have him make the gift to the non-profit, with the restriction that it's to be used only for the payment of that bill.

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bear with me a moment and let me see if I can find a Revenue Procedure or Tax court case. The code is silent here, other than the fact that the cost must be out of pocket, which it is.

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Going to back-peddle a bit here. Actually the code does apply. (26 U.S. Code § 170)

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"(c)Charitable contribution defined For purposes of this section, the term “charitable contribution” means a contribution or gift to or for the use of ..."

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The code then goes on to define the various types of tax exempt organizations.

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I also see this, "gift to or for the use of.." in various secondary sources (Master Tax Guide, ALR) being quoted as the reason that an executive or other related party of the non-profit can deduct bills paid on behalf of the charity.

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You're good to go here. But two "heads-up;"

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Never give a donor tax advice about what's deductible, and as I already mentioned, DO give a letter of acknowledgement, in the event the donor is audited. (Said differently, you should acknowledge the gift, but not provide tax advice about the tax deductibility of the gift)

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Please let me know if you have ANY questions at all, before rating me.

I hope you’ll rate me (using those stars, or faces on your screen, by clicking submit) based on thoroughness and accuracy, rather than any good news / bad news content.

Otherwise I’ll receive no compensation for the work here at all, from JustAnswer.

Thank you!

Lane

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents since 1986.

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,677
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
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Customer reply replied 1 year ago
Thank you so much Lane. I had been searching the IRS site for hours... and could not find the answer.

You're very welcome. You'll see that here: https://www.law.cornell.edu/uscode/text/26/170

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Specifically 26 U.S. Code § 170(c)

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Thanks much for the rating!

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