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
1.7 Operating for Charitable Purposes 1
1.9 Private Foundation Sanctions 2
1.10 Statistical Profile 9
2 Starting, Funding, and Governing a Private Foundation 11
2.1 Choice of Organizational Form 11
2.5 Acquiring Recognition of Tax-Exempt Status 11
2.6 Special Requirements for Charitable Organizations 12
2.7 When to Report Back to the IRS 12
3 Types of Private Foundations 15
3.1 Private Operating Foundations 15
3.3 Conduit Foundations 16
3.9 Foreign Private Foundations 16
4 Disqualified Persons 17
4.1 Substantial Contributors 17
4.2 Foundation Managers 17
4.3 Certain 20 Percent Owners 17
4.4 Family Members 18
5 Self-Dealing 19
5.1 Private Inurement Doctrine 19
5.2 Private Benefit Doctrine 20
5.3 Definition of Self-Dealing 22
5.3A Excess Compensation Tax 23
5.4 Sale, Exchange, Lease, or Furnishing of Property 28
5.5 Loans and Other Extensions of Credit 29
5.6 Payment of Compensation 30
5.8 Uses of Income or Assets by Disqualified Persons 30
5.11 Indirect Self-Dealing 32
5.12 Property Held by Fiduciaries 40
5.14 Additional Exceptions 48
5.15 Issues Once Self-Dealing Occurs 48
6 Mandatory Distributions 55
6.1 Distribution Requirements--in General 55
6.2 Assets Used to Calculate Minimum Investment Return 55
6.5 Qualifying Distributions 56
7 Excess Business Holdings 57
7.1 General Rules 57
7.2 Permitted and Excess Holdings 59
7.3 Functionally Related Businesses 60
8 Jeopardizing Investments 61
8.2 Prudent Investments 61
8.3 Program-Related Investments 61
9 Taxable Expenditures 63
9.1 Legislative Activities 63
9.2 Political Campaign Activities 64
9.3 Grants to Individuals 64
9.5A Funding of Employee Hardship Programs 67
9.6 Grants to Foreign Organizations 73
9.9 Spending for Noncharitable Purposes 73
9.10A Distributions to Group Exemption Organizations 74
9.11 Excise Tax for Taxable Expenditures 76
10 Tax on Investment Income 77
10.1 Rate of Tax 77
10.3 Formula for Taxable Income 77
10.5 Foreign Foundations 78
11 Unrelated Business Activity 79
11.2 Exceptions 79
11.3 Rules Specifically Applicable to Private Foundations 80
11.4 Unrelated Debt-Financed Income Rules 80
11.5 Calculating and Reporting the Tax 81
12 Tax Compliance and Administrative Issues 89
13 Termination of Foundation Status 91
13.1 Voluntary Termination 91
13.3 Transfer of Assets to a Public Charity 91
13.4 Operation as a Public Charity 91
13.6 Termination Tax 91
14 Charitable Giving Rules 93
14.1 Concept of Gift 93
14.2 Basic Rules 94
14.4 Deductibility of Gifts to Foundations 94
14.5 Qualified Appreciated Stock Rule 94
14.9 Administrative Considerations 95
15 Private Foundations and Public Charities 101
15.2 Evolution of Law of Private Foundations 101
15.3 Organizations with Inherently Public Activ
