Section 507(a) Terminations

(1) Under this section, a private foundation may be involuntarily terminated for

repeated or flagrant violations of Chapter 42 provisions. Private foundation status can also be voluntarily terminated under this section. The common result is the tax imposed under Section 507(c). See Treas. Reg. 1.507-1(a).

(2) The status of an organization as a private foundation will be terminated only if:

a. The organization notifies the IRS of its intent to accomplish such

termination, or

b. With respect to the organization there have been either willful repeated acts

(or failures to act), or a willful or flagrant act (or failure to act), giving rise to tax liability under Chapter 42; and the IRS notifies the organization that it is therefore liable for Section 507(c) taxes.

c. If tax liability is incurred, the organization either pays the Section 507(c) tax,

less any amount abated under Section 507(g), if any, or has the entire amount abated under Section 507(g).

(3) Rev. Rul. 2008-41, 2008-30 I.R.B. 170, includes a discussion of the termination

of trusts under Section 507(a)(1) which are subject to the private foundation provisions of 4947(a)(2) and possible imposition of an excise tax under Section 507(c). The ruling found the trust has not terminated its private foundation status under Section 507(a)(1) as a result of the division of the trust into two or more separate trusts because no notice of termination was filed or was required to be filed. Accordingly, the excise tax imposed under Section 507(c) does not apply. See Treas. Reg. 1.507-1(b)(6).