Preface ix Book Citations xi 1 Introduction to Private Foundations 1 § 1.1 Private Foundations: Unique Organizations 1 § 1.2 Definition of Private Foundation 2 § 1.4 Private Foundation Law Primer 2 § 1.5 Foundations in Overall Exempt Organizations Context 2 § 1.6 Definition of Charity 2 § 1.7 Operating for Charitable Purposes 3 § 1.9 Private Foundation Sanctions 3 § 1.

10 Statistical Profile 12 § 1.11 Private Foundations and Law 50 Years Later 12 2 Starting, Funding, and Governing a Private Foundation 17 § 2.1 Choice of Organizational Form 17 § 2.3 Estate Planning Principles 17 § 2.4 Foundations and Planned Giving 17 § 2.5 Acquiring Recognition of Tax-Exempt Status 18 § 2.6 Special Requirements for Charitable Organizations 19 § 2.7 When to Report Back to the IRS 19 3 Types of Private Foundations 21 § 3.

1 Private Operating Foundations 21 § 3.3 Conduit Foundations 22 § 3.4 Common Fund Foundations 23 § 3.8 Split-Interest Trusts 23 § 3.9 Foreign Private Foundations 23 4 Disqualified Persons 25 § 4.1 Substantial Contributors 25 § 4.2 Foundation Managers 25 § 4.3 Certain 20 Percent Owners 25 § 4.

4 Family Members 26 § 4.5 Corporations or Partnerships 26 § 4.6 Trusts or Estates 26 5 Self-Dealing 27 § 5.1 Private Inurement Doctrine 27 § 5.2 Private Benefit Doctrine 28 § 5.3 Definition of Self-Dealing 31 § 5.3a Excess Compensation Tax 31 § 5.4 Sale, Exchange, Lease, or Furnishing of Property 37 § 5.

5 Loans and Other Extensions of Credit 37 § 5.6 Payment of Compensation 38 § 5.8 Uses of Income or Assets by Disqualified Persons 39 § 5.11 Indirect Self-Dealing 42 § 5.12 Property Held by Fiduciaries 50 § 5.14 Additional Exceptions 58 § 5.15 Issues Once Self-Dealing Occurs 59 6 Mandatory Distributions 65 § 6.1 Distribution Requirements--in General 65 § 6.

2 Assets Used to Calculate Minimum Investment Return 66 § 6.3 Determining Fair Market Value 66 § 6.4 Distributable Amount 69 § 6.5 Qualifying Distributions 70 § 6.7 Satisfying the Distribution Test 75 7 Excess Business Holdings 77 § 7.1 General Rules 77 § 7.2 Permitted and Excess Holdings 79 § 7.3 Functionally Related Businesses 80 § 7.

7 Excise Taxes on Excess Holdings 80 8 Jeopardizing Investments 81 § 8.2 Prudent Investments 81 § 8.3 Program-Related Investments 81 § 8.4 Investment Frauds 82 § 8.5 Excise Tax for Jeopardizing Investments 82 9 Taxable Expenditures 83 § 9.1 Legislative Activities 83 § 9.2 Political Campaign Activities 84 § 9.3 Grants to Individuals 84 § 9.

4 Grants to Public Charities 97 § 9.6 Grants to Foreign Organizations 97 § 9.7 Expenditure Responsibility 99 § 9.8 Internet and Private Foundations 100 § 9.9 Spending for Noncharitable Purposes 100 § 9.10 Distributions to Certain Supporting Organizations 102 § 9.10a Distributions to Group Exemption Organizations 102 § 9.11 Excise Tax for Taxable Expenditures 104 10 Tax on Investment Income 107 § 10.

1 Rate of Tax 107 § 10.1A Payment of Tax 107 § 10.2 Reducing Excise Tax 108 § 10.3 Formula for Taxable Income 109 § 10.4 Reductions to Gross Investment Income 109 § 10.5 Foreign Foundations 109 § 10.6 Exemption from Tax on Investment Income 110 11 Unrelated Business Activity 111 § 11.1 General Rules 111 § 11.

2 Exceptions 111 § 11.3 Rules Specifically Applicable to Private Foundations 112 § 11.4 Unrelated Debt-Financed Income Rules 113 § 11.5 Calculating and Reporting the Tax 114 12 Tax Compliance and Administrative Issues 121 § 12.1 Form 990-PF 121 § 12.2 Form 990-PF Penalties 124 § 12.3 Automatic Revocation for Non-Filing 128 § 12.4 Public Disclosure and Inspection of Returns 129 § 12.

5 Reporting and Payment of Excise Taxes 132 13 Termination of Foundation Status 145 § 13.1 Voluntary Termination 145 § 13.3 Transfer of Assets to a Public Charity 146 § 13.4 Operation as a Public Charity 147 § 13.5 Mergers, Split-Ups, and Transfers Between Foundations 150 § 13.5A Termination of Trusts Treated as Private Foundations 150 14 Charitable Giving Rules 153 § 14.1 Concept of Gift 153 § 14.2 Basic Rules 154 § 14.

3 Gifts of Appreciated Property 155 § 14.4 Deductibility of Gifts to Foundations 155 § 14.5 Qualified Appreciated Stock Rule 155 § 14.6 Deduction Reduction Rules 155 § 14.7 Special Gift Situations 156 § 14.8 Planned Giving Revisited 156 § 14.9 Administrative Considerations 156 15 Private Foundations and Public Charities 163 § 15.1 Distinctions Between Public and Private Charities 163 § 15.

2 Evolution of Law of Private Foundations 164 § 15.3 Organizations with Inherently Public Attributes 164 § 15.4 Publicly Supported Organizations--Donative Entities 166 § 15.5 Service Provider Organizations 167 § 15.7 Supporting Organizations 169 § 15.8 Change of Public Charity Category 169 § 15.9 Noncharitable Supported Organizations 171 § 15.14 Termination of Public Charity Status 172 16 Donor-Advised Funds 173 § 16.

1 Basic Definitions 173 § 16.3 Types of Donor Funds 173 § 16.7 Public Charity Status of Funds 173 § 16.8 Interrelationship of Private Foundation Rules 173 § 16.9 Statutory Criteria 173 § 16.9A Litigation 174 § 16.12 Tax Regulations 176 § 16.13 DAF Statistical Portrait 176 § 16.

14 Criticisms and Commentary 178 § 16.15 Proposed Legislation 185 17 Corporate Foundations 189 § 17.2 Reasons for Establishment of a Corporate Foundation 189 § 17.3 Private Inurement Doctrine 189 § 17.3A Private Benefit Doctrine 189 § 17.5 Self-Dealing Rules 190 § 17.6 Other Private Foundations Rules 191 § 17.7 Tax on Excess Compensation: Potentially Applicable Exceptions Illustrated 191 Appendix A--Sources of the Law 197 Appendix B--Internal Revenue Code Sections 223 Table of Cases 227 Table of IRS Revenue Rulings and Revenue Procedures 233 Table of IRS Private Determinations Cited in Text 237 Table of IRS Private Letter Rulings, Technical Advice Memoranda, and General Counsel Memoranda 245 About the Authors 263 About the Online Resources 265 Cumulative Index 267.