Sale Of Assets

[Caradawg]

A 501-c-3 operating a private school is closing.  Can the nonprofit org sell its school building and grounds to anyone who wants to buy, or does the nonprofit have to sell to another nonprofit?  The school has an outstanding loan that must be paid...the bldg is collateral on the loan.  I know the proceeds, after paying the loan, must be given to another nonprofit.  However, I thought the property could be sold to anyone.

Thanks!  Also, can you tell me where I can read up on nonprofits?

[Dimitris]

I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations.  The IRS does not prohibit the sale of assets of a 501(c)(3) organization except if it is for less than the market value. But you issue is controlled more by state law and states may differ somewhat with how they would treat such issues. Even though this forum is not for such state law issues, I may be able to direct you. I am assuming your organization is a Virginia Nonstock Corporations Act, but if my assumption is incorrect, let me know and I will reply further.  The law of such Nonstock Corporations is available at http://goo.gl/YfmPy

I am assuming that the property is no larger than 1000 acres. As you wrote that the 501(c)(3) organization is closing, it appears that the organization is dissolving. Therefore, you would see § 13.1-902 and the sections after that, as it deals with such dissolution and there is nothing there that requires the sale of real property to be to another nonprofit organization. Harvey Mechanic, Attorney at Law - [email protected]

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.