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May a 501(c)(3) organization return a gift that was given to it if the donor requests the money be given back? The gift of $50,000 was given 5 years ago to publish a book that hasn't been finished yet.  The book will probably be finished this year so at that point will be published if the money is still there.

The answer to your question may depend on the paperwork accompanying the gift but your situation differs from the usual request to get a general support gift back.  Especially if the gift came from a private foundation or other sophisticated donor, a gift given specifically to support the publication of the book might have contained a time limit for completion or would at least contain an implied requirement for completion within a reasonable time.  After 5 years, the donor may be entitled to return of the funds.  (Assuming the donor claimed a deduction when the gift was given 5 years ago, the return of the grant would be considered income when received.)  But if you really think the book will be done this year, you probably ought to negotiate with the donor to see if you can keep the money to support the publication.  It would be a shame to give the money back just when it is about to be used.

7/6/2010