Transferee foundations: Internal Revenue Code section 507(b)(2)


The transfer of assets of a private foundation to another private foundation in a liquidation, merger, recapitalization, redemption or other adjustment, organization, or reorganization is a section 507(b)(2) transfer. A transfer under this section will not cause the transferee to be treated as a newly created organization for pur­poses of the private foundation provisions, requiring notice to the IRS to rebut the presumption of private foundation classification. How­ever, the transferee may be required to reapply for exemption if it wishes to be exempt under section 501(c)(3) of the Code.

Because such a transfer of assets is not considered a termination of the transferor foundation unless the transferor voluntarily gives notice, it is not a termination to which the private foundation termination tax applies.

Additional information:

Return to Life Cycle of a Private Foundation