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Fundraising Tax Question

I have a tax question related to school fundraising that I need answered pretty quickly. Thanks in advance for anyone able and willing to help.

I have a friend who has two middle school children. The middle school is planning a trip to Disney. As a way to raise money for the trip, the students were offered a chance to bag groceries at a local supermarket. Only a fraction of the kids showed up. My friend's kids showed up both days and worked the entire time both days. I am sure you can see where this question is heading.

My friend is the one who set this fundraiser up and the headmaster of the school told her that the kids who participated would "get" the money towards the trip. Lo and Behold, when it came to crunch time, the financial manager at the school said, "Nope, it has to be divided up between ALL the middle school kids". I know that in a way she is right but it just doesn't seem totally correct. Her kids have gone from getting around $200 per kid to $25 per kid based on this decision.

She doesn't want to do anything against the law but she also doesn't want to just give away the $175 either. She participated so diligently because she needs to money to pay for the kids' trips.

Here's how it worked. The kids were told about the opportunity to raise money for their trips. The kids who showed up were placed at several aisles where they collected money while bagging the groceries. Each aisle had a bucket and one or two kids. The buckets read something like "Donations collected for ABC Middle School Trip to Disney World". I don't remember exactly what it read - could that be important in deciding how the money can or cannot be divided?

It just doesn't seem right that this was a voluntary thing and the kids who didn't want to do it or kids whose parents had plenty of money or didn't want to bring their kids are reaping the benefits of those who spent several hours bagging groceries. There has to be some common-sense "loop-hole to make this fair to the kids who participated. And I don't use the word "loop-hole" in an illegal or unethical sense but it was the only word I could think of.

PLEASE HELP!

Reply to
tsargentjr
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How is this a tax question?

Reply to
PeterL

Perhaps I am confused, but I don't think this has anything to do with taxes, so I'm not sure this is the right newsgroup in which to be discussing your question.

I don't think the law or tax code has anything to say about how the middle school chooses to distribute the founds they raised during the fundraiser. I see no reason why they can't use the money to reduce costs for the families that actually participated and not for those who didn't. This is especially true given that this is what the headmaster said was going to happen; it seems rather dishonest for the school to change the rules after the fact.

Perhaps you are suggesting that by giving the money to only those families who participated, rather than to everyone in the class, the school transforms the money from a grant or financial assistance, to payment for services rendered, i.e., income, in which case the kids might have to pay taxes on it. That's the only angle I can see which might explain your decision to post your question in this newsgroup.

I don't think that's an issue. It isn't real income, since it is restricted to a particular purpose and the money will probably never actually change hands -- it'll just reduce the amount that those families are expected to pay to the school for their share of the trip. Furthermore, when a school holds a fundraiser which is honestly billed as such, the school gets to decide what to do with the money afterward; giving preferential treatment to students who helped to raise the money doesn't turn it into income. A pointed example -- if I send my kids to a private school, and I can't afford to pay full tuition, and the school agrees to reduce my tuition in exchange for me doing some volunteer work for the school, then I'm pretty sure that I don't have to report that tuition reduction as income.

A final point worth noting is that even if it IS income, it's unlikely that the students have enough annual income to make them obligated to pay any taxes, so it really isn't a big issue.

In short, I think the school is shafting your friend, they have no legal grounds for doing so, and your friend should tell them that she expects them to honor the conditions that the headmaster laid out before the fundraiser.

Reply to
Jonathan Kamens

It does seem attenuated, doesn't it? But it seems to me that it deals with the application of services and funds for a nonprofit purpose (assuming the school qualifies - they generally do). Those would be tax issues for the school, since improper application of funds could result in various tax-related problems.

Stu

Reply to
Stuart Bronstein

There's the problem, and there's no answer in tax law. It was your friend who decided to involve the school in the fundraiser rather than going the traditional route of having the kids beg from friends and family while the parents hit up coworkers. It seems to me she's now stuck with the school's decision about what to do with the money, unless the kids haven't turned it over yet. If they haven't, it's a decision as to how much grief she wants to cause them at school.

Reply to
Phil Marti

Sounds like a tax issue to me.

If the kids who did the work get all the money then those kids would have taxable income. If the funds raised are divided among all the students, then it is arguable that none of them have taxable income.

Reply to
Bill Brown

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