Designation by substantial contributors. Donors to a private foundation that pools all contributions received in a common fund are also eligible for the 50 percent contribution deduction limit and may deduct the full value of appreci­ated property (see Pri­vate pass-through foundation), if the foundation meets certain requirements. The foundation must be described as a supporting organization of a pub­lic charity (as defined in section 509(a)(3) of the Internal Revenue Code) except for the fact that any donor (or donor’s spouse) who is a substan­tial contributor has the right to designate annu­ally the public charities that are to receive the income from the donor’s contribution to the fund and to direct (by deed or by will) the payment to public charities of the corpus in the common fund from the donor’s contribution.

Distribution requirements. To qualify, the private foundation must be required by its gov­erning instrument to distribute, and it must actu­ally distribute (including administrative expenses):

  1. All of the adjusted net income of the com­mon fund to one or more public charities by the 15th day of the 3rd month after the close of the tax year in which the income is realized by the fund, and
  2. All the corpus from any donor’s contribu­tion to the fund to one or more public chari­ties not later than one year after the donor’s death or after the death of the donor’s surviving spouse if the surviving spouse has the right to designate the recipients of the corpus.

Failure to designate. A private foundation will not fail to qualify if a substantial contributor or spouse fails to exercise the right to designate the recipients of income or corpus of the fund, as long as the income and corpus from the contri­bution are distributed as required.


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