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Nonprofit Law/501c3 nonprofit buying a home


Hello Harvey,

We run a nonprofit in Florida and we run it from our home and it is a year old and is rapidly growing. We like our area since the local city is really helping us get exposure and we don't want to move it out of the city. There is a foreclosed home available in our area and we were thinking of buying the home as the nonprofit to run the non-profit. We are growing and it will help us with space. Is this a good legal idea to do it? Our donor base is throughout the country and we aspire to be a national organization.

Thank you,

A 501(c)(3) organization may purchase real estate either for use or investment. However, you indicated, by "we run" that a family is controlling the 501(c)(3) organization.  Is the 501(c)(3) organization a public charity or a private foundation? It appears to be a public charity, so let me know if your board is controlled by persons that are unrelated by blood, marriage or for-profit business. After you give me that information I will reply further.

But I will inform you now that you must consider that, if the 501(c)(3) organization purchases the real property and allows a family to use it, not only for their work for the organization, but also for their living, what value is given to the family is considered compensation to them.   The IRS does allow 501(c)(3) organizations to give someone compensation just so it is not more than what  is reasonable.
Starting on pdf page 10 of the IRS discusses many of the factors it would look at to decide whether a salary is reasonable.

The first factor is how many hours weekly the person is working for the 501(c)(3) organization and then what the normal salary would be for someone who is qualified for such a job in that area of the country. "It is, in general, just to assume that reasonable and true compensation is only such amount as would ordinarily be paid for like services by like enterprises under like
circumstances." Reg. 1.162-7(b,(3)

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.

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Harvey Mechanic


DO NOT GIVE ME INFORMATION THAT YOU WANT KEPT CONFIDENTIAL. 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.

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