Extent to which transferee foundation succeeds to combined tax benefit of transferor


A transferee organization will succeed to the combined tax benefit of the transferor organiza­tion to the extent of the combined tax benefit multiplied by a fraction.  The numerator of the fraction is the fair market value of the assets (minus encumbrances) transferred, and the de­nominator is the fair market value of the total assets of the transferor (minus encumbrances) immediately before the transfer.  Fair market value is determined as of the time of the transfer.  A transferee organization not effectively controlled, directly or indirectly, by the same person or persons who control the transferor organiza­tion will not succeed to a combined tax benefit greater than the fair market value of assets transferred at the time of the transfer.

Example.  In a liquidation, the White Foun­dation, a private foundation, transfers to the Oak Foundation, a private foundation, all of its as­sets, which have a fair market value of $400,000.  Immediately before the transfer the White Foundation’s combined tax benefit was $200,000, and the Oak Foundation’s combined tax benefit was $300,000.  After the transfer, the Oak Foundation has a combined tax benefit of $500,000 ($200,000 +$300,000).

Return to Life Cycle of a Private Foundation