Donated profits

[DTS]

I have a new partnership that will be donating 40-50% of all profits to large, well-known charities.

Is there some protocol that would usually be required and followed between a partnership and the customers that will purchase products from a partnership knowing about the donation of profits, like some sort of verification? Seems like a handshake and goodwill would not be sufficient.

Thank you,

Dennis

[taxmandan]

Are you asking

how the customers of the partnership who are buying their product can claim a charitable donation? Since the partnership isn't a 501(c)3 the customers aren't making a donation to any charity, the partnership is doing that, so no deduction for the customer. What a business does with profits isn't a consideration for the customer. The partnership would pass thru/report the charitable donations to the partners on their K-1s, to deduct on their personal tax returns if they itemize and don't exceed the charitable limits.

[DTS]

taxmandan...

that is the situation.

The reason for my question is that I was thinking the buyers of the product may or may not be willing to buy unless there is some verification where the money is going since the incentive to buy was the donation to a worthy cause from the company. Like I stated earlier, I did not know if there was some sort of protocol I was unaware of, given the circumstances.

However, like you said, this may not be of any concern to the customer.

Dennis

[Luis Mopeo]

This is very common. A business will pledge a certain percentage to charity for sales of a particular product, or a dollar amount per item. Food establishments will do fund raisers for exempt organizations and donate a percentage of receipts from Sunday's sales, etc.

Many people are incented to make purchases for this reason.

I've never seen any kind of document generated when I've bought a burger during the "We'll give Jerry's Kids 25 cents for every burger sold" promotion.

It seems to me that it would fall under truthful advertising laws rather than tax law.

[DTS]

taxmandan and Luis

Thank you for the help and clarification. I appreciate it!

Dennis

[Lion]

Verification

After they've given some money and -- hopefully -- received a wonderful thank you note on the charity's letterhead, they could frame the letter and hang it prominently in their establishment or include it in future advertisements (with permission?) or just save it in a scrapbook in case a customer asks. They could publish a pie chart with percentages of their revenues donated to charity, used in operations, profits to owners, etc., if the charity slice is impressively large.