Reducing Private Foundation Excess Business Holdings: Additional Time to Dispose of Large Gifts or Bequests


The IRS may grant the foundation an additional five-year extension (beyond the initial five years) to reduce excess business holdings to permissible levels, if these holdings result from an unusually large gift or bequest of diverse business holdings or holdings with complex corporate structures. To receive this extension:

  1. The foundation must establish that it made diligent efforts to dispose of the holdings within the initial five-year period, and could not do so (except at a price substantially below fair market value) because of the size and complexity or diversity of the holdings,
  2. The foundation must submit to the IRS, before the end of the initial 5-year period, a plan for disposing of all the excess business holdings involved in the extension, and
  3. The IRS must determine that the foundation's plan for disposal can reasonably be expected to be carried out before the end of the additional five-year period.

The foundation must also submit the plan mentioned in (2) above to the state Attorney General (or other appropriate official) having administrative or supervisory authority or responsibility for the foundation's disposition of the excess business holdings involved.  The foundation must then send to the IRS any response it receives from the Attorney General (or other official) regarding its plan.

A request for extension of the period for disposition, as well as the copy of any response received from state officials, should be submitted as a private letter ruling request.

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