Tax Planning and Compliance for Tax-Exempt Organizations, 6th Edition

CHAPTER 14Self-Dealing: IRC §4941

• 14.1 Definition of Self-Dealing
  • (a) Statutory Language
  • (b) Statutory Exceptions
  • (c) Exceptions Provided in Regulations
• 14.2 Sale, Exchange, or Lease of Property
  • (a) Transactions Through Agents
  • (b) Exchanges
  • (c) Furnishing or Use of Property
  • (d) Co-Owned Property
  • (e) Partnerships
• 14.3 Loans
  • (a) Donation of Indebted Property
  • (b) Interest-Free Loans
• 14.4 Compensation
  • (a) Definition of Reasonable
  • (b) Intermediate Sanctions Connection
  • (c) Commissions
  • (d) Advances
  • (e) Bank Fees
• 14.5 Transactions that Benefit Disqualified Persons
  • (a) Indemnification of Disqualified Persons
  • (b) Excise Taxes
  • (c) Memberships and Galas
  • (d) Charitable Pledges
  • (e) Incidental or Tenuous Benefit
• 14.6 Payments to Government Officials
• 14.7 Sharing Space, People, and Expenses
  • (a) Can the Foundation Pay for Its Share?
  • (b) Public Facilities
• 14.8 Indirect Deals
• 14.9 Property Held by Fiduciaries
• 14.10 Issues Once Self-Dealing Occurs
  • (a) Undoing the Transaction
  • (b) Amount and Date Involved
  • (c) Who Pays What Tax?

Despite the general prohibition against inurement of a charity’s assets to the benefit of its insiders,¹ Congress, in 1969, found certain loans, stock bailouts, and other financial transactions between privately funded organizations and their creators’ families troubling. Former Internal Revenue Code (IRC) §503 (now repealed) permitted such transactions as long as a reasonable rate of interest was charged and the fair market value (FMV) was paid. ...