Transfer to an Effectively Controlled Foun­dation: Private Foundation Excise Taxes

If a private foundation transfers all of its net assets to one or more private foundations that are effectively controlled, directly or indi­rectly, by the same person or persons who effec­tively controlled the transferor private foundation, then the transferee foundation is treated as if it were the transferor for purposes of all private foundation excise taxes as well as the termination provisions. When proportionality is appropri­ate, the transferee foundation will be treated as if it were the transferor in the proportion that the fair market value of the assets transferred (mi­nus encumbrances) bears to the fair market value of the assets (minus encumbrances) of the transferor immediately before the transfer. This does not relieve the transferor private foun­dation from filing required returns, reports, and other information.

Example: The trustees of X charitable trust, a private foundation, form Y, a charitable corpo­ration, also a private foundation, to make the conduct of their activities easier. The trustees of X are also the directors of Y. Y has the same charitable purposes as X. All the assets of X are transferred to Y, and Y continues to carry on X’s charitable activities. Under these circum­stances, Y is treated as if it were X. Y will be permitted to take advantage of any special rules relating to excise tax requirements to the same extent as could X if X had continued in exis­tence.

 


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