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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121592  
Subject: 501(c)(7) income questions Date: 6/6/2012 9:34 AM
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I'm Treasurer of a Quilt Guild which qualifies as a 501(c)(7) Social Club, and have a couple of questions.

Someone has suggested that the Guild sponsor a booth at one of the local fairs where members can choose to sell some of the things they have made, and donate some portion of the proceeds to the Guild. This seems allowable to me after reading Publication 557 since this would be income coming from the members and related to what we do. Does anyone see a problem with this that I'm not seeing?

We just donated 104 quilts to the local veteran's shelter, and someone who saw the quilts has asked if the Guild will make her a quilt that she would buy. That seems like business income to me, and would violate our exempt status. It has been suggested, however, that one of the members could make the quilt, sell it to this person, and donate a portion of the earnings or even all of it to the Guild. That seems like it might work since it is income derived from the activity around which we organize, similar to above, but I'm still thinking that having someone commission the work makes it more of a gray area. Anyone have any thoughts on that?

The publication only has just over a page around 501(c)(7) organizations, so I could use some advice on my questions above.
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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 116225 of 121592
Subject: Re: 501(c)(7) income questions Date: 6/6/2012 11:54 AM
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I don't know much about the regulation of 501(c)7 organizations, but I do note that they can receive up to 15% of their gross revenues from non-member use of facilities and/or services. You can find more information at the IRS website, http://www.irs.gov/charities/nonprofits/article/0,,id=96189,.... You may want to look at the last link on the page which will take you to the IRM audit guide for 501(c)7 organizations. This will detail what an IRS agent would be looking at should the instigate an audit of your Guild.

Ira

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 116226 of 121592
Subject: Re: 501(c)(7) income questions Date: 6/6/2012 12:39 PM
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Thanks. I never would have found that without your pointer. This will help me a lot.

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 116227 of 121592
Subject: Re: 501(c)(7) income questions Date: 6/6/2012 1:02 PM
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Keep in mind that the info provided on the IRS website presents the IRS position, sometimes even when that position has been successfully challenged in tax court. If you have any questions regarding your guild's specific fact pattern, you should seek competent professional counsel.

Ira

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