CHAPTER 16Excess Business Holdings and Jeopardizing Investments: IRC §§4943 and 4944
16.1 Excess Business Holdings
A private foundation’s level of ownership in an operating business, other than one conducted as a charitable activity or holding only passive investments, is limited by Internal Revenue Code (IRC) §4943, entitled “Excess Business Holdings.” A foundation is entitled to receive a gift that causes it to have impermissible ownership in a business, but cannot retain it. Specific time periods are prescribed for disposition of such holdings received by a foundation through donation or inheritance. The basic rule is that the combined ownership by the private foundation (PF) and those that fund and manage it (its insiders, who are formally referred to as disqualified persons) in a business enterprise of any legal form—corporation, partnership, joint venture, or other unincorporated company—must not exceed 20 percent. If it can be proved that the foundation ...
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