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I am hoping to generate some revenue by sending out emails to interested people about giving a gift to the company. I am aware in order to say "donation" you must be a 501(c)(3) however if you claim it as a gift you are ok. I am an LLC. I am wanting to ask that if I change the paypal button to "gift" instead of donate and write in the email you cannot make this a tax deduction would I have to report this as income to the IRS and pay taxes? I have heard once that only the giver of the gift must pay taxes if above a certain amount and my gifts would only come in small amounts so technically would this be income I have to report? Thank You.

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Why not something like Kickstarter? This seems sketchy at best, I have no idea about the legalities and tax implications. Why would people just send your company money? – Davy8 Oct 13 '12 at 15:07

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You can get legal issues with that. People are giving gifts to your LLC - why? What business purpose would it serve? It will probably be re-characterized as gifts to you personally.

Also, keep in mind that people might claim ownership after giving a gift to you. You have to talk to a lawyer to make sure you make the right disclaimers in the correct format to avoid many pitfalls.

And why on earth would people give you gifts to begin with? Do they know you? It might be that the IRS will claim that you're disguising income as gift (which is not that far from the truth, as it sounds) and disallow that.

Get a legal and tax advice from a professional (A lawyer and a CPA/EA).

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I was hoping it would be Kickstarter kind of support. Not necessarily a gift but a way to raise money to complete a project without going through kickstarter. The money would directly be used to complete the project. Would that be ok to do? – Grant Wilkinson Oct 14 '12 at 0:25
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@GrantWilkinson look for my answers re Kickstarter. Kickstarter is basically sales, and the tax treatment (IMHO) is simple. What you're discussing is a way to avoid paying income taxes on something that is essentially an income. It doesn't seem "right" to me (even if you find an attorney willing to fight this, how much do you think it will cost you?) – littleadv Oct 14 '12 at 1:38

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