Q: If a non profit purchases tickets at a table for $60,000 and auctions the tickets for $100,000, are there legal issues?
A friend of mine has a chance to buy a 10 seat table at a very high profile celebrity event for $60,000. Since the event is invitation only it sells for well over $50,000 a pair. There would be 2 pairs of tickets auctioned. But the table isn’t donated, they would have to buy it. If the organization just bought the table and kept the profit, minus auction fees etc are there any issues they may come across? I know they would have to have the organization’s name on the table. Or could the organization have someone pay for their table and they just pay them back? Those are the two options.
A:
Under California law, a non-profit organization engaging in this type of transaction should be aware of certain legal considerations. Firstly, when a non-profit purchases tickets for an event and then auctions them at a higher price, the profits made from this transaction must be used in accordance with the organization's charitable purpose. The income generated should align with the non-profit's mission and objectives as stated in its bylaws and as required for maintaining its tax-exempt status.
If the non-profit is considering having an individual purchase the table and then reimbursing them, this could raise questions regarding the proper use of the organization's funds. It's important to ensure transparency and proper accounting practices in such transactions to avoid any appearance of impropriety or misuse of funds.
Additionally, when conducting an auction, the non-profit should comply with all applicable state and federal laws related to fundraising and auctions. This includes providing accurate information about the value of the auction items and any tax implications for the buyers.
In any of these scenarios, it's wise to consult with a legal advisor to ensure all activities are conducted in compliance with the law and in the best interest of the non-profit's mission. Keeping thorough records of all transactions and decisions made is also crucial for demonstrating compliance and accountability.
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