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Murray Solomon
The answer depends on the exact nature of the arrangement. There are four types of crowdfunding:
•Equity-based: funders receive an interest in the form of equity in the venture they fund or, alternatively, revenue or profit-share arrangements.
•Lending-based: funders often receive fixed periodic income and expect repayment of the original principal investment.
•Reward-based: funders gain a non-financial benefit in return for financial contributions. Non-monetary rewards often take the form of a token of appreciation or the pre-purchasing of products or services.
•Donation-based: funders donate to causes that they want to support, with no expected compensation (i.e., philanthropic or sponsorship-based incentive).
Most arrangements on Kickstater, for example, are Reward-based and would be taxable to the recipient.
Under the recently-passed JOBS Act, congress has made it easier for start-ups to raise equity through crowdfunding. In this case, the proceeds could be non-taxable under IRS Sec. 118.
Some recipients could be Sec. 501(c)(3) tax exempt entities, and the proceeds could be non-taxable donations.
Finally, if you receive more than $20,000 and have more than 200 transactions, expect that you will receive a Form 1099-K from the company facilitating the payments.
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610 weeks ago
•Equity-based: funders receive an interest in the form of equity in the venture they fund or, alternatively, revenue or profit-share arrangements.
•Lending-based: funders often receive fixed periodic income and expect repayment of the original principal investment.
•Reward-based: funders gain a non-financial benefit in return for financial contributions. Non-monetary rewards often take the form of a token of appreciation or the pre-purchasing of products or services.
•Donation-based: funders donate to causes that they want to support, with no expected compensation (i.e., philanthropic or sponsorship-based incentive).
Most arrangements on Kickstater, for example, are Reward-based and would be taxable to the recipient.
Under the recently-passed JOBS Act, congress has made it easier for start-ups to raise equity through crowdfunding. In this case, the proceeds could be non-taxable under IRS Sec. 118.
Some recipients could be Sec. 501(c)(3) tax exempt entities, and the proceeds could be non-taxable donations.
Finally, if you receive more than $20,000 and have more than 200 transactions, expect that you will receive a Form 1099-K from the company facilitating the payments.