Pigeon Inc a 501c3 organization received support from the f

Pigeon, Inc., a § 501(c)(3) organization, received support from the following sources Governmental unit A for services rendered Governmental unit B for services rendered Fees from the general public for services rendered $ 6,300 4,500 Each payment was of $100) Gross investment income Contributions from disqualified persons Contributions from other than disqualified persons 75,000 39,000 26,000 Each gift was of $50) 60,000 $310,800 Total support a. Does Pigeon satisfy the test for receiving broad public suppont? why or why b. Is Pigeon a private foundation? Be specific in your answer. not? c. Arnold Horn, Pigeon\'s treasurer, has asked you to advise him on whether igeon is a private foundation. Write a letter to him in which you address the issue. His address is 250 Bristol Road, Charlottesville, VA 22903.

Solution

a.

For an organization to qualify as receiving broad public support, both the external support test and the internal support test must be satisfied.

The total support received by Pigeon is $310,800.

For purposes of the external support (more than one-third support) test, the following amounts are included.

Governmental unit A for services rendered (limited to)             $6,300

Governmental unit B for services rendered                                $4,500

General public for services rendered                                           $75,000

Contributions from other than disqualified persons                  $160, 000

Qualifying support                                                                           $245,800

Therefore, the external support test is satisfied ($245,800 ÷ $310,800 = 79.0%).

For purposes of the internal support (not more than one-third support) test, only the gross investment income of $39,000 is within the limited categories.

Thus, this test also is satisfied ($39,000 ÷ $310,800 = 12.5%).

Pigeon satisfies both tests for receiving broad public support.

b.

Since Pigeon satisfies both of the required tests for being an organization that is broadly supported by the public, it is not a private foundation.

c.

ABC, CPAs

XYZ Address

January 25, 2018

Mr. Arnold Horn, Treasurer

Pigeon, Inc.250 Bristol Road

Charlottesville, VA 22903

Dear Mr. Horn:

As you requested, I have determined whether Pigeon, Inc., is a private foundation for the prior year. Pigeon is not a private foundation.

For Pigeon not to be classified as a private foundation, it must satisfy both an external support (i.e., broadly supported) test and an internal support test. The total support received by Pigeon is$310,800. To satisfy the external support test, more than one-third of Pigeon’s support must normally come from certain external sources. For Pigeon, this includes the following.

Governmental unit A for services rendered (limited to)             $6,300

Governmental unit B for services rendered                                $4,500

General public for services rendered                                           $75,000

Contributions from other than disqualified persons                  $160, 000

Qualifying support                                                                           $245,800

Therefore, the external support test is satisfied ($245,800 ÷ $310,800 = 79.0%).

For purposes of the internal support (not more than one-third support) test, only the gross investment income of $39,000 is within the limited categories.

Thus, this test also is satisfied ($39,000 ÷ $310,800 = 12.5%).

Pigeon satisfies both tests for receiving broad public support.

Sincerely

PQR, CPA

Partner