IF A NON-PROFIT EARNS MONEY ON AN INVESTMENT IS THE PROFIT TAXABLE?

{ 2 comments… read them below or add one }

geek49203 May 6, 2010 at 4:04 pm

Generally speaking, no.

Tens of thousands of non-profits do in fact earn money on investments (it’s called an “endowment” or “foundation”) and they don’t normally pay taxes. The Bill and Melinda Gates Foundation is worth around $32 Billion and they don’t pay taxes on their investments.

A non-profit might fall under a law that would compel them to pay taxes if they don’t spend enough of the investment income.

RamsGod May 6, 2010 at 4:11 pm

Generally speaking, yes. Tax-exempt sources of nonprofit revenues include donations, grants, passive income on investments, and the sales of mission-related products or services.

Revenues that are from sales activities that are unrelated to an organization’s primary exempt mission are subject to an unrelated business income tax under IRC 511.

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