Tax Law (Questions About Taxes)/cash donation to NPO

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Question
QUESTION: Hello John,


I, as an individual, loaned a sum of money to a small business. they pay me interest, and I get 1099 at the end of the year.   Now I decide to transfer or gift 100% of the interest paid to a non profit organization as a cash donation.   What would be better?  to receive the interest from the business and then donate it OR have that business donate that interest directly to an NPO?  is there benefit in either case and to whom?
Thank you

ANSWER: Michael,

Thanks for your question.

It does not matter.  You are the beneficial recipient of the interest, regardless of what you instruct the debtor to do with the interest.  In either event, you must report the interest on your tax return. Of course, either way, you get a charitable contribution deduction for the amount given.

Hope this helps.

John Stancil, CPA

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

QUESTION: Thanks.  Unless, they don't pay me any interest but rather donate an equal amount to the NPO. then I don't have to claim anything. right?

Answer
The problem with that is two-fold. One, it would have to be a non-interest bearing note and you could not compel them to pay the interest. Second, depending on the amount of the note, the IRS could impute interest. When this happens they make you pay tax on the amount of interest you should receive.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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