Hypothetical: Dr. Deacon owns two businesses: The Blackacre Free Clinic and the Blackacre Office Rental...
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Hypothetical: Dr Deacon owns two businesses: The Blackacre Free Clinic and the Blackacre Office Rental Corp. The clinic is a legitimate charitable organization providing free care to the poor. The Blackacre Office Rental Corp. rents offices to doctors for a profit. Because he is nearing the end of his life and wants to continue to fund his free clinic, as well as realizing the considerable tax advantages of seeing the income from his properties going directly to the clinic instead of being taxed away, Dr Deacon deeds the properties from the rental company to the clinic. Will Dr Deacon's plan be successful? Yes. Giving free care to the poor is a charitable purpose, so the income will be tax free. Yes. The income from the forprofit investments will be used for a charitable purpose, so it will also be tax free. No Renting office space to doctors constitutes a private emolument and will therefore be subject to taxation. No The income from renting office space to doctors will be unrelated business income, and will therefore be subject to taxation.
Hypothetical: Dr Deacon owns two businesses: The Blackacre Free Clinic and the Blackacre Office Rental Corp. The clinic is a legitimate charitable organization providing free care to the poor. The Blackacre Office Rental Corp. rents offices to doctors for a profit. Because he is nearing the end of his life and wants to continue to fund his free clinic, as well as realizing the considerable tax advantages of seeing the income from his properties going directly to the clinic instead of being taxed away, Dr Deacon deeds the properties from the rental company to the clinic.
Will Dr Deacon's plan be successful?
Yes. Giving free care to the poor is a charitable purpose, so the income will be tax free.
Yes. The income from the forprofit investments will be used for a charitable purpose, so it will also be tax free.
No Renting office space to doctors constitutes a private emolument and will therefore be subject to taxation.
No The income from renting office space to doctors will be unrelated business income, and will therefore be subject to taxation.
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