Can the President of our struggling 501(c)(3) take a tax deduction for personally paying most of our expenses during our first year in operation?
Yes. A donor may claim a deduction for contributions made “to or for the use of” a charitable organization. The organization ought to acknowledge the payments and state that no goods or services have been received in return (assuming that is the case) so that the President has the substantiation letter if ever audited by the IRS.
Tuesday, October 26, 2010
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We were simply told by an IRS rep or agent that a CEO/Pres. loaning money, needs to be paid back by our org.
Loan given by the CEO/Pres.can be returned by the org to the head in installments, or in one repayment. We have made one repayment toward a total repayment. Were we misinformed? Thank you for this superb service. --R.K. via e-mail
You were not misinformed when the CEO/President expects to be paid back. When the CEO/Pres makes a loan to the organization, no deduction is available. The original question did not suggest that the President expected to get the money back, and when the contribution is made either to or for the use of the organization, the President is entitled to claim the contribution deduction. --Don Kramer
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