CHAPTER THIRTEEN
Termination of Foundation Status
§ 13.4 OPERATION AS A PUBLIC CHARITY
p. 682. Add to second bullet:
IRS Form 8940, Request for Miscellaneous Determination, is used to request approval for termination of private foundation status under a 60-month termination. At the end of the 60 months, the form can be used to submit financial information evidencing its receipt of sufficient public support to qualify as a public charity. The fee for each is $400. The form is shown in Exhibit 13.1.
Exhibit 13.1. Form 8940.
§ 13.5 MERGERS, SPLIT-UPS, AND TRANSFERS BETWEEN FOUNDATIONS
p. 683, note 76. Insert following existing text:
Termination of a private foundation can involve this rule and one of the other termination scenarios. In one instance, a foundation transferred all of its assets to a private operating foundation and a public charity (a museum); the transaction concerning the transferee foundation was ruled by the IRS to be subject to this rule, while the transfer to the museum was not (it was subject to the rules in § 13.3) (Priv. Ltr. Rul. 201435016).
p. 685. Insert Exhibit 13.1A:
Transferor Foundation
EIN: 3-3333333
Taxable Year Ending 12/31/2015
Appendix A
During 2015, the Transferor Foundation (“Old Foundation”) transferred all of its net assets to the Transferee Foundation, Inc. (“New Foundation”) (EIN 22-2222222), a commonly controlled private foundation. Such a transfer is described in Treasury Regulation 1.507-3(a)(9), which states “If a private foundation transfers all of its net assets to one or more private foundations which are effectively controlled (within the meaning of Section 1.482-1(a)(3)), directly or indirectly, by the same person or persons which effectively controlled the transferor private foundation, for purposes of Chapter 42 (section 4940 ET SEQ.) and part II of subchapter F of chapter 1 of the Code (Sections 507 through 509) such a transferee private foundation shall be treated as if it were the transferor.” Additionally, IRC Section 507(b)(2) provides that “in the case of a transfer of assets of any private foundation to another private foundation pursuant to any liquidation, merger, redemption, recapitalization, or other adjustment, organization, or reorganization, the transferee foundation shall not be treated as a newly created organization.”
| Part I: | The New Foundation has picked up the Old Foundation's income and expenses for purposes of Section 4940. |
| Part V: | The New Foundation has reported the Old Foundation's historical distributions and asset averages for computation of the 1% rate calculation. |
| Part VI: | The New Foundation has applied the overpayment of excise tax of $1,300 from the Old Foundation's 2015 Form 990-PF as if it were its own. |
| 2220: | The New Foundation has reported the annualized amounts and tax payments attributable to the Old Foundation in addition to its own amounts. |
| Part X: | The New Foundation has calculated the average value of assets as if it held all of the Old Foundation's assets the entire year. |
| Part XII: | The New Foundation has included the qualifying distributions of the Old Foundation as if they were made by the New Foundation. |
| Part XIII: | The New Foundation has picked up the Old Foundation's undistributed income for 2014 of $121,849 as if it were its own. |
| Part XV: | The New Foundation has picked up the Old Foundation's grants of $117,000 as if they were made by the New Foundation. |
p. 688. Insert as first complete paragraph:
Due to the statutory provision that a new foundation receiving 25 percent or more of a successor foundation's assets147.1 inherits all of the predecessor foundation tax attributes, the new foundation has an opportunity to reduce its excise tax on investment income in its first year. Contrary to the general rule,147.2 the 1 percent tax can be achieved by carrying over the percentages resulting from the predecessor's payout history in its first year. Exhibit 13.1A contains an example of an attachment to Form 990-PF for the successor foundations. The Form 990-PF, on the front page, contains a box entitled “first year.” The authors suggest consideration of not checking that box for the first return filed by the successor(s) because that implies the Part IV tax reduction calculation does not apply.
p. 693. Last sentence on page, change Exhibit 13.1 to 13.2.
p. 694. Change Exhibit 13.1 to Exhibit 13.2.
(d) Non-Control, Complete Assets Transfer
p. 697. Insert at bottom of page following list:
The IRS, in a private letter ruling, enumerated 13 factors involved in the transfer of a private operating foundation's assets to another private operating foundation, which might also serve as a good checklist for a private foundation anticipating significant asset transfers.147.3