End of relationship leads to clarity

I’m astonished. It wasn’t even an hour after J____ confirmed the termination of our relationship when I suddenly felt new clarity to ask C____, the attorney he had recommended, to resume her research project or, in some ways, to start all over on a new project.

I wrote to C____,

As my wife and I have continued our researches into the feasibility of shifting our corporation into 501(c)(3) status, several things have become clear to us. Among them:

The order in which we want to proceed with our broad-based legacy planning process.

And,

Some of the questions we need to ask–including questions we need to ask of you.

In terms of order: we have realized that we want to continue research into the idea of shifting to a 501(c)(3) at the same time that we pursue other options.

As for the questions we believe we want and need to ask of you–for which we are happy to pay you the fees we agreed to:

Can you find any 501(c)(3) organizations currently in existence where . . .

Cash-flow-in comes strictly from sales of goods;

All–or a substantial (90%+) portion–of income (cash-flow-in minus expenses) is given to other 501(c)(3) organizations for pursuit of their charitable purposes; and

It does not generate UBTI–or the UBTI it does generate is insubstantial (say, 10% or less of total income)?

It seems these three characteristics describe how we would want to run our 501(c)(3), assuming we move in that direction. Our sense: If there is no 501(c)(3) that exhibits all three of these kinds of behavior, then we are not interested in attempting to set such a precedent with our corporation.

We believe this is First-Stage Research–something required before we attempt to define an acceptable charitable purpose for a new 501(c)(3). Frankly, I have few doubts we can find an acceptable charitable purpose. Our questions arise concerning whether, once we are approved, the IRS will agree that our operations meet the requirements of a charitable organization and, therefore, that our income ought to be treated as tax-exempt.

Supposing you can find some 501(c)(3)’s that match the description I have offered in item #1 (what I believe accurately reflects the kind of company we would want to form), then we are very interested in proceeding with what I will call the Stage Two, or Second-Stage, Research Project we discussed two and a half weeks ago: the research required to discover an acceptable charitable purpose that will cover all the behaviors we want to pursue under the proposed 501(c)(3) corporate form.

If you can’t find any 501(c)(3)’s that match my description in item #1, then we would like to know what 501(c)(3)’s you can find that come closest to meeting the description I just provided. Depending on what you find, we may still want to proceed with the 501(c)(3) option, but will want very seriously to consider other options before proceeding to the Second-Stage research.

Assuming this proposed plan of attack makes sense to you, my wife and I . . . would like, hereby, to request that you remove the “Full Hold” we placed on your researches last Monday and, instead, to proceed with all appropriate diligence with the First-Stage Research.

Thank you so much for your patience during this week or so of confusion and continued fundamental research on our part.