Crowdfunding Proceeds to Sch C Business

Client has a Schedule C business providing temporary meeting space/memberships (with additional services) to a particular demographic of business owners. They are undertaking a crowdfunding campaign and expect to raise more than $250,000. They will not be giving out any sort of free products, no payback on the received funds to donors, and no membership perks. Owner plans to expand the concept in more cities with the proceeds.

Any chance these would be classified as gifts and be non-taxable income to the recipient/business? Looking for resources on the topic, seems to be sparse. If it is a gift, what would be a threshold where it would be considered revenue? For example, if they offered t-shirts in return for a donation over $X, would that change the answer.

i have this in my notes...it's as little old..but maybe there is something of benefit in there

https://www.journalofaccountancy.com/is ... taxes.html

Why are people donating? That's ultimately the question you need to find the answer to, as that's at the core of the gift test (Duberstein test).

Client has a Schedule C business providing temporary meeting space/memberships (with additional services) to a particular demographic of business owners. They are undertaking a crowdfunding campaign and expect to raise more than $250,000. They will not be giving out any sort of free products, no payback on the received funds to donors, and no membership perks. Owner plans to expand the concept in more cities with the proceeds.

Any chance these would be classified as gifts and be non-taxable income to the recipient/business? Looking for resources on the topic, seems to be sparse. If it is a gift, what would be a threshold where it would be considered revenue? For example, if they offered t-shirts in return for a donation over $X, would that change the answer.

Any chance for him to classify this as an non-profit 501(c) entity and just take a reasonable salary for his services? I feel like I may be shot for suggesting this but it would avoid any income piece...

People are donating because the business is tied to a social cause that the people who donate believe in. I don't see them reorganizing as a non-profit at this point, but it certainly would make this process simple.

This one scares me!

Sounds to me like it is taxable business revenue.

Sounds to me like it is taxable business revenue.

Yes, there's a difference between gofundme for medical bills and crowdfunding for a business I would think