Your Questions About Profit

John asks…

Can a non profit organization lose its status if it hosts a used book sale?

I work for a non for profit organization. We are planning to host a used books sale in our facilities. Can we lose our non for profit status if we invite a “for profit” book distributor to participate in our used books sale? The “for profit” book distributor will be selling used books only. An answer to this question with verifiable references will be very much appreciated.

Thanks!

mikey answers:

No you will not. Many organizations do a fundraiser, such as a craft fair using paid vendors.

James asks…

How is profit made on selling silver tableware to a refinery treated for tax purposes?

Purchased silver flatware and holloware (mostly dented) for the purpose of reselling to a refinery as scrap silver to make a profit.

Most of the pieces were purchased 1-2 years ago; a few within the last year. However, it was refined in one batch with one payout.

Would that profit be treated as ordinary income or capital gain? What are the tax rates?

If capital gain, how would I separate the profit (payout minus basis) into long term and short term gain since it was refined in one big batch with one payout?

mikey answers:

How much money are we talking here? Is this a profitable endeavor

Capital gain. The items you purchased more than a year before selllng are long term. And those that you bought less than a year before selling are short term.
You will enter your purchase date and $ paid for it. Then you enter sales date, which will be same for all entries since you sold all at one time. Do you know the weights of each purchase? You would prorate the total price recieved in the sale by the % of weight that each purchase represents.

Mary asks…

What is the legal entity for a business where 100% of profits go to support a non-profit endeavor?

My friend is currently the CEO of an NPO, and wants to launch a for-profit business using the same model as his NPO and donating 100% of his profits to the non-profit. the purpose of the for-profit business is to add financial security to the non-profit and lessen reliance on grants, etc.

also, both the NPO and the for-profit would be under the same parent company. Although the branding of the 2 companies would be under different names.

so what is the legal entity for this? can it still be classified as a non-profit? an L3C? or would it still be billed as a for-profit agency. or something entirely different?

mikey answers:

The IRS will smell something then will call for major audit. Tell your friend to do it right, legal and to avoid doing something unaware of. He better consult with an attorney for this where there will be many papers to be filled for the IRS, secretary of the state.

Helen asks…

What is the profit-maximizing output level and what are the firms economic profits?

I’m at a loss… Any and all help is greatly appreciated. Thank you!

The marginal revenue curve of a monopoly crosses its MC curve at $30 per unit, & an output of 2 million units. The price consumers are willing to pay for this output is $40 per unit. If it produces this output the firm’s ATC is $43 per unit, & its AFC is $8 per unit. What is the producer’s profit maximizing output level? What are the firm’s economic profits?

mikey answers:

3!

Linda asks…

How much is too much profit for health insurance companies to make?

I keep hearing how some companies made billions in profits but how many billions worth of claims did they pay to earn that profit?

The people that complain that they made billions in profit never say how much they had to spend to earn it. Apparently some people think they are supposed to pay for billions in claims and just break even?

And those of you that want government supplied health care because it cuts out the insurance companies profits: Do you really think the US government would not have massive overhead costs? What does the government do now that is more efficient than the private sector, anything?

mikey answers:

They don’t spend as much as you think they do on payouts. They have high power attorneys who are paid big bucks to fight patient cases. That’s why people are angry because instead of working with patients they are fighting against them.

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