Private Foundations: Tax Law and Compliance, 4th Edition

Chapter FourDisqualified Persons

1. § 4.1 Substantial Contributors
2. § 4.2 Foundation Managers
3. § 4.3 Certain 20 Percent Owners
4. § 4.4 Family Members
5. § 4.5 Corporations or Partnerships
6. § 4.6 Trusts or Estates
7. § 4.7 Private Foundations
8. § 4.8 Governmental Officials
9. § 4.9 Terminating Disqualified Person Status

A basic concept of the tax laws relating to private foundations is that of the disqualified person. An understanding of the meaning of this term is essential to appreciation of the scope of the rules defining permitted sources, controlled organizations, prohibited self-dealing, and the other private foundation rules. Essentially, a disqualified person is a person¹ (including an individual, corporation, partnership, trust, estate, or other private foundation) standing in one or more particular relationships with respect to a private foundation, its trustees, and its founders.

§ 4.1 Substantial Contributors

One category of disqualified person² is a substantial contributor to a private foundation.³ The term means any person who contributed⁴ or bequeathed an aggregate amount of more than the higher of 2 percent of the total contributions and bequests received by the private foundation before the close of its tax year in which the contribution or bequest is received by the private foundation from that person or $5,000 to the private foundation. In computing the $5,000/2 percent threshold, all contributions and bequests to the private foundation since its creation are taken into account. ...