For each of the following independent situations, determine whether the organiza
ID: 406963 • Letter: F
Question
For each of the following independent situations, determine whether the organization is at risk for receiving intermediate sanctions from the Internal Revenue Service for conferring excess economic benefits on disqualified persons. If so, indicate how the organization can minimize those sanctions.
Jane is president of an IRC Sec. 501(c)(3) public charity and personally owns a building that she has decided to sell to the not-for-profit organization. The appraisal value is $200,000, and the agreed-upon selling price is $250,000.
A large public charity is very happy with its president’s performance and offers him a new compensation agreement for the coming year. He will receive a base salary plus a percentage of the increase in gross revenues of the organization with no limitation as to the maximum amount.
Ann is a member and director of a symphony association. She receives 20 free admission tickets as a member of the organization.
The local chapter of the United Way recently hired Joe Curtis as its new president at a salary of $200,000. The outgoing president was paid $150,000. Mr. Curtis had other offers that ranged from $95,000 to $190,000. The minutes of the meeting reflected that he was exceptionally talented and would not have accepted the position for a lower salary.
Required:
Submit your responses to the requirements found in the opening paragraph of the assignment in a 1-2 page document in MS Word. Label each question clearly. For computations, please include them in a table.
Explanation / Answer
Jane is president of an IRC Sec. 501(c)(3) public charity and personally owns a building that she has decided to sell to the not-for-profit organization. The appraisal value is $200,000, and the agreed-upon selling price is $250,000.
The charity is at risk of receiving a sanction from IRS because the selling price is too much higher of the appraisal value, it seems that because of Jane`s position as president she manage to increase the selling price. To avoid a sanction the charity needs to buy the building at the appraisal value or lower.
A large public charity is very happy with its president’s performance and offers him a new compensation agreement for the coming year. He will receive a base salary plus a percentage of the increase in gross revenues of the organization with no limitation as to the maximum amount.
No sanction because the compensation depends of the performance of the gross revenue
Ann is a member and director of a symphony association. She receives 20 free admission tickets as a member of the organization.
No sanction because this is a regular practices on this kind of industries, the problem would be if Ann were to sell those tickets but if they are just to share with friends and family during the year there is no problem
The local chapter of the United Way recently hired Joe Curtis as its new president at a salary of $200,000. The outgoing president was paid $150,000. Mr. Curtis had other offers that ranged from $95,000 to $190,000. The minutes of the meeting reflected that he was exceptionally talented and would not have accepted the position for a lower salary.
Even though Joe Curtis is a qualified person, he should had been offer the same salary of the previous president or lower. The fact that he received offers from $95,000 to $190,000 doesn’t mean the organization had to offer him $200,000. There is a risk of sanction of IRS
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