The Tax Law of Private Foundations, + website 2019 Cumulative Supplement

Make sense of the new regulatory requirements with expert clarification and practical tools for compliance - updated through 2019 Private Foundations: Tax Law and Compliance, 5th Edition provides clarification, expert insight, and helpful instruction for executives and supporting professionals navigating extensive federal tax law requirements. This 2019 Cumulative Supplement captures the latest regulatory developments for easy reference. Despite their relatively low numbers, private foundations are subject to complex, burdensome regulations that continue to expand. This book summarizes and clarifies the statutory regulations governing private foundations, offers expert insight into the underlying logic, and provides a host of practical tools that ease the filing process and help ensure compliance with the latest laws.

BRUCE R. HOPKINS practices, with the Bruce R. Hopkins Law Firm, LLC, in the field of tax-exempt organizations, including private foundations, and is widely recognized as one of the country's leading lawyers in the field.

JODY BLAZEK is a partner in Blazek & Vetterling, a CPA firm focusing on tax and financial planning for exempt organizations and the individuals who create, fund, and work with them and is recognized as a leading accountant in the field.

Preface ix

Book Citations xi

1 Introduction to Private Foundations 1

§ 1.1 Private Foundations: Unique Organizations 1

§ 1.2 Definition of Private Foundation 1

§ 1.9 Private Foundation Sanctions 1

§ 1.10 Statistical Profile 2

2 Starting, Funding, and Governing a Private Foundation 3

§ 2.1 Choice of Organizational Form 3

§ 2.5 Acquiring Recognition of Tax-Exempt Status 3

§ 2.6 Special Requirements for Charitable Organizations 4

§ 2.7 When to Report Back to the IRS 4

3 Types of Private Foundations 7

§ 3.1 Private Operating Foundations 7

§ 3.3 Conduit Foundations 8

4 Disqualified Persons 9

5 Self-Dealing 11

§ 5.1 Private Inurement Doctrine 11

§ 5.2 Private Benefit Doctrine 12

§ 5.3 A Excess Compensation Tax 14

§ 5.4 Sale, Exchange, Lease, or Furnishing of Property 15

§ 5.5 Loans and Other Extensions of Credit 16

§ 5.6 Payment of Compensation 17

§ 5.8 Uses of Income or Assets by Disqualified Persons 17

§ 5.11 Indirect Self-Dealing 19

§ 5.12 Property Held by Fiduciaries 27

§ 5.15 Issues Once Self-Dealing Occurs 32

6 Mandatory Distributions 33

§ 6.1 Distribution Requirements – in General 33

§ 6.2 Assets Used to Calculate Minimum Investment Return 33

§ 6.5 Qualifying Distributions 34

7 Excess Business Holdings 35

§ 7.1 General Rules 35

§ 7.2 Permitted and Excess Holdings 37

§ 7.3 Functionally Related Businesses 37

8 Jeopardizing Investments 39

§ 8.3 Program-Related Investments 39

9 Taxable Expenditures 41

§ 9.1 Legislative Activities 41

§ 9.2 Political Campaign Activities 41

§ 9.3 Grants to Individuals 42

§ 9.9 Spending for Noncharitable Purposes 42

10 Tax on Investment Income 45

§ 10.3 Formula for Taxable Income 45

§ 10.5 Foreign Foundations 45

11 Unrelated Business Activity 47

§ 11.2 Exceptions 47

§ 11.3 Rules Specifically Applicable to Private Foundations 48

§ 11.4 Unrelated Debt-Financed Income Rules 48

§ 11.5 Calculating and Reporting the Tax 49

13 Termination of Foundation Status 57

§ 13.1 Voluntary Termination 57

§ 13.3 Transfer of Assets to a Public Charity 57

§ 13.4 Operation as a Public Charity 57

§ 13.6 Termination Tax 57

14 Charitable Giving Rules 59

§ 14.1 Concept of Gift 59

§ 14.4 Deductibility of Gifts to Foundations 60

§ 14.5 Qualified Appreciated Stock Rule 60

§ 14.9 Administrative Considerations 61

15 Private Foundations and Public Charities 67

§ 15.2 Evolution of Law of Private Foundations 67

§ 15.5 Service Provider Organizations 67

§ 15.7 Supporting Organizations 68

§ 15.8 Change of Public Charity Category 69

§ 15.9 Noncharitable Supported Organizations 70

16 Donor-Advised Funds 71

§ 16.1 Basic Definitions 71

§ 16.3 Types of Donor Funds 71

§ 16.9 Statutory Criteria 71

§ 16.12 Tax Regulations 72

§ 16.13 DAF Statistical Portrait 72

§ 16.14 Criticisms and Commentary 74

Table of Cases 81

Table of IRS Revenue Rulings and Revenue Procedures 87

Table of IRS Private Determinations Cited in Text 91

Table of IRS Private Letter Rulings, Technical Advice Memoranda, and General Counsel Memoranda 99

About the Author 115

About the Online Resources 117

Cumulative Index 119

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