You are here:

Nonprofit Law/501c3 selling donated property


QUESTION: Hello I am the treasurer of amateur radio club. Our operating funds are under 10,000. We have a situation that has developed. We had a piece of equipment that was willed to us back in 2005. The unit is now 25 years old. It was purchased in 1988 for 1800.
The unit has not run since 2005 condition unknown.
We offered it for sale, an a member purchased it for 100.00. Is there any problem with this situation.
One of other members is clamming we are not allowed to do this. We must keep the equipment and not sell it or donate it to another 501c3.
Any help in this matter is appreciated.
Thanks for your time.

ANSWER: A 501(c)(3) organization may sell donated property to members unless it is going into dissolution (or already winding up its operations). The IRS has published at
---Start of Excerpt--
Where an exempt organization engages in a transaction with an
insider and there is a purpose to benefit the insider rather than
the organization, inurement occurs even though the transaction
ultimately proves profitable for the exempt organization. The test
is not ultimate profit or loss but whether, at every stage of the
transaction, those controlling the organization guarded its
interests and dealt with related parties at arm's-length.
---End of Excerpt--

Internal Revenue Code section 501(c)(3) which is available at:
has, in part, that the 501(c)(3) organization must be "operated
exclusively for religious, charitable ...or educational purposes
... no part of the net earnings of which  inures to the benefit of
any private shareholder or individual".

That term is defined in regulations 26 C.F.R. 1.501(a)-1(c) "The
words `private shareholder or individual' in section 501 refer to
persons having a personal and private interest in the activities of
the organization." on the right column of page 2

Therefore, the organization should test the open market and if not more than $100 can be obtained, it is reasonable to sell to a member for $100.

If you show this answer to the complaining member and he still maintains his position, have him cite me to a url (code or regulation) and, after you give me that information I will reply further.  He is probably thinking about the dissolution provisions of the law.

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.    

---------- FOLLOW-UP ----------

QUESTION: To determine market value do we have to have a certified appraiser come in. Or may we use a listing on like ebay or any other publication.

Thank you for your time.

You do not need an appraisal by a certified appraiser.  You may put the item up on eBay or see the sales figures of comparable items on eBay.

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

Nonprofit Law

All Answers

Answers by Expert:

Ask Experts


Harvey Mechanic


I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

©2016 All rights reserved.