A.4. Definition of Knowing

(1) To be liable for the first tier tax, a foundation manager must have "known" that the

expenditure to which he/she agreed was a taxable expenditure. Knowing is defined as the following:

a. A foundation manager has actual knowledge of sufficient facts so that, based

solely upon such facts, such expenditure would be a taxable expenditure;

b. He/she is aware that such an expenditure under these circumstances may

violate the provisions of federal tax law governing taxable expenditures; and

c. He/she negligently fails to make reasonable attempts to ascertain whether the

expenditure is a taxable expenditure, or he/she is in fact aware that it is such an expenditure. See Treas. Reg. 53.4945-1(a)(2)(iii).

(2) "Knowing" does not mean "having reason to know," but rather actual knowledge

in determining whether a foundation manager is liable for tax. For example, a foundation manager would have "knowledge" if he/she has sufficient understanding of the facts and law involved that the expenditure would be a taxable expenditure. However, evidence tending to show that a foundation manager has reason to know of a particular fact or particular rule is relevant in determining whether he had actual knowledge of such fact or rule. For example, evidence tending to show that a foundation manager has reason to know of sufficient facts so that, based solely upon such facts, an expenditure would be a taxable expenditure is relevant in determining whether he has actual knowledge of such facts. See Treas. Reg. 53.4945-1(a)(2)(iii).

(3) The burden of proof is upon the IRS to show knowledge. See Section 7454(b)

and Treas. Reg. 53.4945-1(a)(2)(viii).