Termination of Private Foundation Status |
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Once an organization is classified as a private foundation, it may only terminate that status under the provisions of Internal Revenue Code section 507. Under section 507, there are four ways to terminate private foundation status, two of which involve tax liability:
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Involuntary termination for either willful repeated violations or a willful and flagrant violation of the private foundation excise tax provisions and becoming subject to the termination tax
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A foundation may also transfer its assets to another private foundation, commence voluntary termination, and pay no termination tax because it has no assets.. In this case, the transferee acquires all of the aggregate tax benefits of the transferor associated with the transferred assets..
If the organization’s status is terminated either voluntarily or involuntarily under 1 or 2 above, the organization becomes liable for tax under section 507(c). After assessment is made, the IRS may abate the tax if certain actions are taken.
Return to Life Cycle of a Private Foundation
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Page Last Reviewed or Updated: January 06, 2009