Can A Nonprofit Sell Their Assets?May 05, 2022
NOTE: this is for informational purposes only, and you should consultant an attorney for specific guidance.
Yes, nonprofits are corporations, and they can buy and sell assets, just like any other business. Here are some important considerations that nonprofits need to make:
Supports your purpose:
Selling (or gifting) of assets need to support your nonprofit's purpose. Practically speaking, you should sell or gift it to a similar nonprofit to carry on the purpose. Alternatively, you should use the proceeds to fund your mission/tax exempt purpose.
Avoid private inurement:
Private inurement or self-benefiting transactions occur when individuals (staff, board, etc.) benefit personally from the nonprofit. When selling assets, do not sell an asset at a discount to a staff member or give it to a staff member, when you can sell it in the public space.
You need to demonstrate that the transaction was at “arm’s length” – or that it’s conducted in the same manner you would with somebody who wasn't related to the nonprofit. Practical application of this is to determine the fair market price (what that asset will be sold for in the public space). Then communicate that it is available for sale.
Reporting to IRS:
Finally, if the asset or property that you are selling was donated to the nonprofit within the past three years and is valued at more than $5,000, you must complete IRS Form 8282.
It’s important to turn assets you’re not using into cash or place them in service with another nonprofit! I trust this guidance will help you take action to make that happen.
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