Private Foundations — Self-Dealing (Section 4941) (Portfolio 470)

The Bloomberg Tax Portfolio, Private Foundations — Self-Dealing (Section 4941), No. 470, discusses in detail the excise taxes imposed by §4941 on acts of self-dealing between private foundations and certain related persons.

Section 4941 imposes an excise tax on any disqualified person who engages in an act of self-dealing with a private foundation, as well as on any foundation manager who participates in the act of self-dealing. An initial tax of 10% of the amount involved is imposed on the self-dealing person, while the participating foundation manager is subject to an initial tax of 5% of the amount involved. The failure to correct the act of self-dealing results in a 200% second-tier tax on the disqualified person and a 50% second-tier tax on the foundation manager.

This Portfolio describes the disqualified persons who are subject to the tax, as well as specific acts of self-dealing. Among the self-dealing acts between a disqualified person and a private foundation that are subject to tax are: sales, exchanges, and leases of property; loans and extensions of credit; payment of unreasonable compensation; furnishing of goods, services, or facilities; transfers or the use of the income or assets of a private foundation; and payments to government officials. The excise taxes are also imposed on indirect acts of self-dealing, as explained in the Portfolio. In addition, this Portfolio discusses the method by which the first and second-tier taxes are imposed, with particular attention to the means of avoiding or abating the second-tier tax by correcting the act of self-dealing.

This Portfolio may be cited as Berry, 470 T.M., Private Foundations — Self-Dealing (Section 4941).