Please cite the text.. Law of Nonprofit – The Life Cycle of a Charitable Organiz

Please cite the text.. Law of Nonprofit – The Life Cycle of a Charitable Organization
Read Chapter 9 (pages 407-454) and answer the problem question…..PROBLEM …..
You are an IRS examiner. You are auditing Land Conservation, Inc. (LCI), a §501(c)
(3) nonprofit that preserves land from development by buying and reselling it with
easements that prohibit future development of the land except for a single-family
house. Two years ago, Larry Luck, the executive director and chairman of the board,
and his wife Letitia purchased 500 acres in their hometown for $500,000. They
financed the purchase entirely with a no-interest loan from LCI. Last month, LCI
bought the land from them for $1 million, placed the easement prohibiting further
development on the land, and then said it was worth only $500,000 in the open
market because of the restriction…….
NOTES AND QUESTION
Letitia Luck is both Larry’s wife and LCI’s lawyer. At the time that the board
approved the loan, she did not mention that the local banks were requiring 20% down
and 5% interest on all loans. At the time of the sale, she prepared an appraisal of the
land, which she presented to the board. She did not compare the price of the land to
that of any other property; she simply said that the value of the land “must have been
reduced substantially due to the restrictions.” The board of directors approved both
transactions unanimously.
Are there grounds for imposing intermediate sanctions? If so, what transaction or
transactions concern you? Who should be sanctioned? What should the penalty be?
Do you think that the tax exemption should be revoked? Why or why not? Assume
that you are also working with state charity officials. What state law principles, which
were covered in Chapters 2 and 3, may have been broken?