Preface xiii Book Citations xix 1 Introduction to Private Foundations 1 §1.1 Private Foundations: Unique Organizations 1 § 1.2 Definition of Private Foundation 4 § 1.3 Background 5 § 1.4 Private Foundation Law Primer 8 § 1.5 Foundations in Overall Exempt Organizations Context 15 § 1.6 Definition of Charity 16 § 1.7 Operating for Charitable Purposes 17 § 1.

8 Organizational Rules 21 § 1.9 Private Foundation Sanctions 24 § 1.10 Statistical Profile 28 2 Starting, Funding, and Governing a Private Foundation 29 § 2.1 Choice of Organizational Form 30 § 2.2 Funding a Foundation 31 § 2.3 Estate Planning Principles 33 § 2.4 Foundations and Planned Giving 34 § 2.5 Acquiring Recognition of Tax-Exempt Status 39 § 2.

6 Special Requirements for Charitable Organizations 61 § 2.7 When to Report Back to the IRS 63 § 2.8 Governance 71 3 Types of Private Foundations 85 § 3.1 Private Operating Foundations 85 § 3.2 Exempt Operating Foundations 107 § 3.3 Conduit Foundations 107 § 3.4 Common Fund Foundations 109 § 3.5 Research and Experimentation Funds 110 § 3.

6 Other Types of Foundations 111 § 3.7 Nonexempt Charitable Trusts 112 § 3.8 Split-Interest Trusts 115 § 3.9 Foreign Private Foundations 117 4 Disqualified Persons 121 § 4.1 Substantial Contributors 121 § 4.2 Foundation Managers 124 § 4.3 Certain 20 Percent Owners 124 § 4.4 Family Members 127 § 4.

5 Corporations or Partnerships 128 § 4.6 Trusts or Estates 128 § 4.7 Private Foundations 129 § 4.8 Governmental Officials 129 § 4.9 Termination of Disqualified Person Status 131 5 Self-Dealing 135 § 5.1 Private Inurement Doctrine 137 § 5.2 Private Benefit Doctrine 140 § 5.3 Definition of Self-Dealing 146 § 5.

4 Sale, Exchange, Lease, or Furnishing of Property 150 § 5.5 Loans and Other Extensions of Credit 163 § 5.6 Payment of Compensation 167 § 5.7 Indemnification and Insurance 182 § 5.8 Uses of Income or Assets by Disqualified Persons 188 § 5.9 Sharing Space, People, and Expenses 200 § 5.10 Payments to Government Officials 204 § 5.11 Indirect Self-Dealing 206 § 5.

12 Property Held by Fiduciaries 212 § 5.13 Early Terminations of Charitable Remainder Trusts 218 § 5.14 Additional Exceptions 219 § 5.15 Issues Once Self-Dealing Occurs 221 6 Mandatory Distributions 235 § 6.1 Distribution Requirements--In General 235 § 6.2 Assets Used to Calculate Minimum Investment Return 237 § 6.3 Measuring Fair Market Value 247 § 6.4 Distributable Amount 255 § 6.

5 Qualifying Distributions 257 § 6.6 Distributions to Certain Supporting Organizations 279 § 6.7 Satisfying the Distribution Test 281 § 6.8 History of the Mandatory Distribution Requirement 288 7 Excess Business Holdings 293 § 7.1 General Rules 293 § 7.2 Permitted and Excess Holdings 300 § 7.3 Functionally Related Businesses 306 § 7.4 Philanthropic Businesses 310 § 7.

5 Rules Applicable to Certain Supporting Organizations 310 § 7.6 Rules Applicable to Donor-Advised Funds 311 § 7.7 Excise Taxes on Excess Holdings 311 8 Jeopardizing Investments 315 § 8.1 General Rules 316 § 8.2 Prudent Investments 321 § 8.3 Program-Related Investments 331 § 8.4 Investment Frauds 336 § 8.5 Excise Taxes for Jeopardizing Investments 340 9 Taxable Expenditures 345 § 9.

1 Legislative Activities 347 § 9.2 Political Campaign Activities 356 § 9.3 Grants to Individuals 359 § 9.4 Grants to Public Charities 380 § 9.5 Grants to Exempt Operating Foundations 384 § 9.6 Grants to Foreign Organizations 385 § 9.7 Expenditure Responsibility 388 § 9.8 Internet and Private Foundations 399 § 9.

9 Spending for Noncharitable Purposes 404 § 9.10 Distributions to Certain Supporting Organizations 408 § 9.11 Excise Tax for Taxable Expenditures 408 10 Tax on Investment Income 415 § 10.1 Rate of Tax 416 § 10.2 Reducing Excise Tax 417 § 10.3 Formula for Taxable Income 422 § 10.4 Reductions to Gross Investment Income 432 § 10.5 Foreign Foundations 438 § 10.

6 Exemption from Tax on Investment Income 440 11 Unrelated Business Activity 441 § 11.1 General Rules 442 § 11.2 Exceptions 451 § 11.3 Rules Specifically Applicable to Private Foundations 459 § 11.4 Unrelated Debt-Financed Income Rules 469 § 11.5 Calculating and Reporting the Tax 474 12 Tax Compliance and Administrative Issues 479 § 12.1 Successful Preparation of Form 990-PF 482 § 12.2 Reports Unique to Private Foundations 501 § 12.

3 Compliance Issues 522 13 Termination of Foundation Status 567 § 13.1 Voluntary Termination 569 § 13.2 Involuntary Termination 571 § 13.3 Transfer of Assets to a Public Charity 572 § 13.4 Operation as a Public Charity 580 § 13.5 Mergers, Split-Ups, and Transfers Between Foundations 581 § 13.6 Termination Tax 595 § 13.7 Abatement 597 14 Charitable Giving Rules 599 § 14.

1 Concept of Gift 599 § 14.2 Basic Rules 602 § 14.3 Gifts of Appreciated Property 604 § 14.4 Deductibility of Gifts to Foundations 605 § 14.5 Qualified Appreciated Stock Rule 606 § 14.6 Deduction Reduction Rules 608 § 14.7 Special Gift Situations 609 § 14.8 Planned Giving Revisited 612 § 14.

9 Administrative Considerations 613 15 Private Foundations and Public Charities 621 § 15.1 Distinctions between Public and Private Charities 622 § 15.2 Evolution of Law of Private Foundations 624 § 15.3 Organizations with Inherently Public Activity 626 § 15.4 Publicly Supported Organizations--Donative Entities 633 § 15.5 Service Provider Organizations 645 § 15.6 Comparative Analysis of Categories of Publicly Supported Charities 655 § 15.7 Supporting Organizations 658 § 15.

8 Change of Public Charity Category 688 § 15.9 Noncharitable Supported Organizations 689 § 15.10 Relationships Created for Avoidance Purposes 690 § 15.11 Reliance by Grantors and Contributors 691 § 15.12 Other Rules 693 § 15.13 Public Safety Organizations 694 § 15.14 Termination of Public Charity Status 694 16 Donor-Advised Funds 697 § 16.1 Basic Definitions 698 § 16.

2 General Concept of a Gift 699 § 16.3 Types of Donor Funds 701 § 16.4 IRS Challenges to Donor Funds 704 § 16.5 Prohibited Material Restrictions 705 § 16.6 Department of Justice Position 709 § 16.7 Public Charity Status of Funds 710 § 16.8 Interrelationship of Private Foundation Rules 712 § 16.9 Statutory Criteria 714 § 16.

10 Department of Treasury Study 717 § 16.11 Congressional Research Service Study 717 § 16.12 Tax Regulations 721 17 Corporate Foundations 729 § 17.1 Corporate Foundation Overview 729 § 17.2 Reasons for Establishment of a Corporate Foundation 731 § 17.3 Private Inurement Doctrine 731 § 17.4 Disqualified Persons Rules 732 § 17.5 Self-Dealing Rules 733 § 17.

6 Other Private Foundations Rules 743 About the Authors 747 About the Online Resources 751 Index 753.