If a disqualified person sells property to a private foundation, undoing the transaction includes, but is not limited to, requiring rescission of the sale if possible. However, to avoid placing the foundation in a worse position than it would be in if rescission were not required, the amount to be received from the disqualified person will be the greatest of:
- The cash paid to the disqualified person,
- The fair market value of the property at the time of the original sale, or
- The fair market value of the property at the time of rescission. In addition, the disqualified person is required to pay the private foundation any net profit realized after the original sale from the amount received from the sale, to the extent the net profit during the correction period is greater than the income received by the foundation from the property during the correction period.
If, before the end of the correction period, the foundation resells the property in an arm's length transaction to a bona fide buyer who is not a disqualified person, no rescission is required. But, the disqualified person must pay the foundation any excess of the amount that would have been paid to the foundation if the original sale had been rescinded over the amount realized by the foundation upon the resale of the property. In addition, the disqualified person must pay the foundation any net profits realized from the amount received from the original sale, described above.