franchise fee revenue
kimberly kelly (Consultant)
| May 19, 2010I have a non-profit client with multiple locations who is now thinking of franchising their model to others in smaller cities. Does the franchsie fee revenue count towards earned income? (vs. contributed income)? And is it recognized over the term the fee covers? I think the answer is yes to both, but am looking for some authoritative literature.
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Answers
Company: self-employed
Yes to both. All income greater than first $1,000 will be taxable income per IRC Section 511 (a) report it on Form 990T because it's not related to the organization's tax-exempt purpose.