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Scenario:
Robert Thompson has come to you for help. He is considering accepting a job with the Let's Read organization, which proclaims to be a public charity under Section 501(c)(3). Robert has heard rumors that the charity is not what it claims to be. He has tried to read Internal Revenue Service (IRS) Publication 557, Tax-Exempt Status for Your Organization, but he is more confused now than before. You have a meeting with Robert at his office on Monday to explain organizations that have Section 501(c)(3) status. He has provided you with some information about Let's Read and would like you to analyze the information and explain the results. After the meeting, you want to provide Robert with a guide for his use.
Robert explaining what you know about Section 501(c)(3) status organizations. To help Robert with his specific situation, use the summary of the information that he provided, as shown in the following, to answer the questions for him. Include these answers in the document.
The Let's Read organization is a public charity under Internal Revenue Code (IRC) Section 501(c)(3). It had the total support of the following:
United Way support $10,000
The grant from the state 25,000
The grant from the city 10,000
Contributions from individuals 261,000
Investment income 1,000
Revenue from the sale of books 12,000
_______
Total $319,000
Of the $261,000 received from contributors, $240,000 came from four contributors, each giving $60,000; the other $21,000 came from small individual contributions.
Respond to the following:
- Calculate the total amount of support that qualifies as public support in meeting the public support test to escape private foundation status.
- Is the organization considered a public charity? Why?
- If the organization had received $200,000 from one individual and the remaining $61,000 from many small individual contributions, would the not-for-profit (NFP) entity still be classified the same as in your response to the second bullet point?
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