You have described what is called a "self-dealing" transaction in non-profit law (or more technically, an excess benefit or private inurement transaction). Thes

You have described what is called a "self-dealing" transaction in non-profit law (or more technically, an excess benefit or private inurement transaction). These transactions are subject to various tax penalties that apply both to the putative "donor"[1] and to the board members and officers of the non-profit that approved the transaction). Depending on the severity of the self-dealing, the IRS can even strip the non-profit of its 501c3 status or refer the matter to the DoJ for criminal charges. [1] Note that a 200% penalty rate can apply to uncorrected self-dealing transactions. For the board members and officers, an excise tax of 10% may apply, which the non-profit cannot pay on their behalf.