Charitable Transfers - Private Foundations

Private Foundations
A private foundation is an organization that qualifies for tax-exempt status per the IRC code Section 501(c)(3). Unless the organization is a public hospital, university, school or broad publically recognized charitable organization it will typically fall under the private foundation category.


Restrictions and Requirements on Private Foundations:
  • Limited holdings in private businesses.
  • The foundation is required to distribute the income annually to a charity.
  • Restricted business dealings between the foundation and its large contributors.
  • Provisions to assure that expenditures further exempt status.
  • Investments must not interfere with the carry out of exempt status.

Private foundations usually derive their donations from a single source, such as an individual, estate, small business, corporation or family; they typically do not solicit the public for donations. A private foundation receives most of its income from investments and endowments. It then devotes most of its earnings and assets directly to the conduct of its tax exempt purposes, rather than making grants to other organizations for these purposes.

Deduction?
Donations to private foundations will typically allow the donor to receive a tax deduction of up to 30% of the adjusted gross income. If the foundation distributes the contributions they receive to public charities and private operating foundations (where income and corpus are both distributed to a public charity) within 2.5 months following the year of receipt, they could qualify for the 50% of adjusted gross income deduction.

Donor Advised Funds


Related Articles
  1. Personal Finance

    How To Start Your Own Private Foundation

    Private foundations can be time consuming and expensive to set up and operate.
  2. Entrepreneurship

    How To Start Your Own Private Foundation

    The most common type of private foundation is a grant-making foundation. These typically provide grants to charities to fund expenses or programs.
  3. Tax Strategy

    8 Ways a Private Family Foundation Could Spark IRS Interest

    IRS rules are extremely complex and can prohibit acts that seem – or even are – totally fair and even commonsensical. Here's what to watch out for.
  4. Stock Analysis

    Matching Your Charitable Program to Your Goals

    Private foundations have been the gold standard for individuals and families wanting to establish significant charitable giving programs.
  5. Investing Basics

    How To Invest In Private Companies

    It can be tough to invest in a company that doesn't trade on an exchange, but there are also several advantages.
  6. Investing Basics

    How To Invest In Private Companies

    Owning a private firm means sharing more directly in the underlying firm’s profits.
  7. Term

    Advantages of Public Vs. Private Companies

    A privately held company is owned by its founder, management or a group of private investors.
  8. Investing Basics

    Why Companies Stay Private

    Many private companies prefer to stay private and find alternate sources of capital. Find out what firms have to gain by eschewing the windfall from a flashy IPO.
  9. Philanthropy

    How Billionaires Around the Globe Give Back

    This list of foreign billionaire philanthropists is robust. Here's a list of rich entrepreneurs around the globe who have given back in really big ways.
  10. Investing Basics

    What is a Private Company?

    A private company is any corporation that does not have shares publicly traded in the equity markets.
RELATED TERMS
  1. Private Foundation

    A charitable organization that, while serving a good cause, does ...
  2. Charitable Donation

    A gift made by an individual or an organization to a nonprofit ...
  3. Privatization

    1. The transfer of ownership of property or businesses from a ...
  4. Going Private

    A transaction or a series of transactions that convert a publicly ...
  5. Private Equity

    Private Equity is equity capital that is not quoted on a public ...
  6. Private Currency

    Units of value issued by private companies or organizations. ...
RELATED FAQS
  1. What's the largest charitable donation Warren Buffett ever made?

    Learn about Warren Buffett's biggest financial contributions and how his estate is to be divided between charity and Buffett's ... Read Answer >>
  2. What are some of the key reasons a large corporation might prefer to remain a private ...

    Understand the reasons why a large corporation would want to remain as private instead of going public through an initial ... Read Answer >>
  3. How does privatization affect a company's shareholders?

    The most recognized transition between the private and public markets is an initial public offering (IPO). Through an IPO, ... Read Answer >>
  4. Why are private equity investments usually reserved for rich people?

    Learn what investors without a high net worth can do to invest in private equity investments, and discover the benefits and ... Read Answer >>
  5. What are the major differences between investment banking and private equity?

    Read about the major differences between investment banking and private equity, two iconic financial industries with mixed ... Read Answer >>
  6. What kinds of private equity investments are out there? (APO, BX)

    Learn why private equity can be so profitable and how to buy this type of investment often reserved for institutional and ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center