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Thread: Charity / non-profit definition, scam ? or legit ?

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    Senior Member bellwilliam's Avatar
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    Default Charity / non-profit definition, scam ? or legit ?

    yes I am a bit bored (my x1/9 is now running), but this is a legit question...

    This is not a "track" question. but there are some smart brains on this site. This been driving me crazy for the past few years ? lately with the KONY thing, the whole thing just sound "fishy"....

    exactly what function is a "charity" or "non-profit" organization. are most of the legit ?

    1. I've read presidents of few big charities gets paid millions per year.
    2. I've read IRS only require one to "donate" 10% of what you take in donations, and use the rest for "administrative" or "fund-raising"
    3. I know of a good friend that runs an charity outpost in Thailand. HQ is in U.S., every $100 she takes, she sent back 30% to HQ, rest she keeps for local charity, for use in "administrative" and "fund-raising" activities. I am too afraid to ask her...

    are these true ? if so, what is there to prevent Rob to start a "racing for cancer kids foundation" ? for every $1,000 he takes in, spend $100 at local K1 for some cancer kid, and use $200 to buy tires for his SM, so he can promote the charity at the track and pay himself $700 for salary ?

    are most big charities legit ? what's the norm percentage for one's donation that actually goes to hands of the needed ? I would feel really stupid if say $20 out of my $100 donation goes to the needed...
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    you can not embezzle money from a nonprofit for your benefit. the money collected from fundraising/grants can be used for charity and overhead.

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    if you take money from the nonprofit you will loose your nonexempt tax status and be taxed as a for profit company.

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    The Real Captain Slow Red_5's Avatar
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    I've thought about this too and wondered how it worked with racing teams that are charities. Like the team that races MX-5s in Grand-Am Continental tire and a couple of others are charities or at least the charities are their main "sponsor". I'd love to know how it works.
    My original thought was that they were wealthy from some other reason, started a charity to put money in, then started a race team to promote the charity.
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    The Real Captain Slow Red_5's Avatar
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    Quote Originally Posted by howang View Post
    if you take money from the nonprofit you will loose your nonexempt tax status and be taxed as a for profit company.
    You can't take money but I'm pretty sure you can be paid a salary by the charity.
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    People who are good fund raisers for charity are paid a lot of money in salary.

    William, here's a thought. Go down to skid row and hand every bum a $20 bill. 100% of your money will go to the needy.
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    right, the money can be spent on overhead/salary

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    Senior Member Johnny_Se7en's Avatar
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    Quote Originally Posted by Richard EVO View Post
    People who are good fund raisers for charity are paid a lot of money in salary.

    William, here's a thought. Go down to skid row and hand every bum a $20 bill. 100% of your money will go to the needy.
    The needy drug dealers and liquor store owner.
    If nothing happens and there is no one around why did it not happen?

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    Senior Member robburgoon's Avatar
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    My charity raises money to provide a home for headless gophers (buttonwillow dumpsters and hawk bellies). We raise money by putting on a spectacle (motorsports) and it attracts donors (ok, just one donor, me). I'm not looting the fund, the track operations result in (me) adding more money. The money flows in and never back to my pocket.

    There's gotta be some way the IRS stops this form of tax shelter, since you're effectively cutting your tax rate down to 10% for all of the charity activities.
    Last edited by robburgoon; 03-16-2012 at 06:46 PM.

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    Senior Member robburgoon's Avatar
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    Quote Originally Posted by bellwilliam View Post
    are most big charities legit ? what's the norm percentage for one's donation that actually goes to hands of the needed ? I would feel really stupid if say $20 out of my $100 donation goes to the needed...
    Charity Navigator - America's Largest Charity Evaluator | Home

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    Senior Member bellwilliam's Avatar
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    that is scary;

    Charity Navigator - 10 Charities Overpaying their For-Profit Fundraisers
    Disabled Police Officers Counseling Center spend 90.9% on professional fund raising fees
    Children's Charity Fund, Inc, spend 78% on professional fund raising fees

    Charity Navigator - 10 Super-Sized Charities
    Worldvision alone spents 1.2 billion on expenses in 1 year.
    Last edited by bellwilliam; 03-16-2012 at 07:12 PM.
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    Cell phones for soldiers sounds about right

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    How about Chrysler corporation - a perenial non-profit?

    If they would reorganize as a charity dedicated to providing vocational opportunities to drug addled autoworkers, Viper buyers could declare their purchases as a charitable contgributions when they file their tax returns.

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    Master of Disaster SteveLevin's Avatar
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    Quote Originally Posted by Red_5 View Post
    I've thought about this too and wondered how it worked with racing teams that are charities. Like the team that races MX-5s in Grand-Am Continental tire and a couple of others are charities or at least the charities are their main "sponsor". I'd love to know how it works.
    My original thought was that they were wealthy from some other reason, started a charity to put money in, then started a race team to promote the charity.
    I believe the structure is not that the charity sponsors them in the conventional sense, but, rather, they claim the money that they would have gotten from a regular sponsor as their donation to the charity (and thus it's a tax deduction)

    Steve
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    Senior Member robburgoon's Avatar
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    Quote Originally Posted by SteveLevin View Post
    I believe the structure is not that the charity sponsors them in the conventional sense, but, rather, they claim the money that they would have gotten from a regular sponsor as their donation to the charity (and thus it's a tax deduction)

    Steve
    Interesting. I wonder how you establish an amount for that. What your peers are getting? Name your own price?

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    Master of Disaster SteveLevin's Avatar
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    Quote Originally Posted by robburgoon View Post
    Interesting. I wonder how you establish an amount for that. What your peers are getting? Name your own price?
    As my account says when considering what number to deduct "my rates for audit representation are $300/hour." If it were me, I would figure out fair market value and then have a ton of paperwork to defend that position if you get an IRS enquiry. I suspect large charitable contributions get extra scrutiny from The Man.

    Steve

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    Senior Member robburgoon's Avatar
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    Quote Originally Posted by SteveLevin View Post
    As my account says when considering what number to deduct "my rates for audit representation are $300/hour." If it were me, I would figure out fair market value and then have a ton of paperwork to defend that position if you get an IRS enquiry. I suspect large charitable contributions get extra scrutiny from The Man.

    Steve
    Tricky, since fair market value would really be whatever someone would be willing to pay (then no reason to use the charity)

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    dirty smack talker hakeem's Avatar
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    Quote Originally Posted by robburgoon View Post
    My charity raises money to provide a home for headless gophers (buttonwillow dumpsters and hawk bellies). We raise money by putting on a spectacle (motorsports) and it attracts donors (ok, just one donor, me). I'm not looting the fund, the track operations result in (me) adding more money. The money flows in and never back to my pocket.

    There's gotta be some way the IRS stops this form of tax shelter, since you're effectively cutting your tax rate down to 10% for all of the charity activities.
    Can this work? Seems like it might!

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    Senior Member Silversprint's Avatar
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    Charity and non-profit are not the same.

    There are a few track organizations in california classified as non-profit.
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    Quote Originally Posted by Silversprint View Post
    Charity and non-profit are not the same.

    There are a few track organizations in california classified as non-profit.
    Uuuuhhh, like SCCA?
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