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. Professionals

    Private Charities

    Private Charities
  3. 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.
  4. Active Trading Fundamentals

    Dow Theory

    Learn about the foundation upon which technical analysis is based.
  5. Professionals

    Introduction

    Introduction
  6. 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.
  7. Investing Basics

    How To Invest In Private Companies

    Owning a private firm means sharing more directly in the underlying firm’s profits.
  8. Professionals

    Foundation for Regulatory Issues

    FINRA/NASAA Series 66: Section 7 Foundation for Regulatory Issues
  9. Term

    Advantages of Public Vs. Private Companies

    A privately held company is owned by its founder, management or a group of private investors.
  10. 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.
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. Philanthropy

    Charitable giving to human causes on a large scale. Philanthropy ...
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 are some advantages of raising capital through private placement?

    Understand how a business can raise capital through private placement and the benefits business owners receive through this ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center