Section 507(b)(2) Transfers

(1) A transferor private foundation may transfer all its assets to one or more private

foundations who will, subject to the appropriate requirements in the regulations, inherit the attributes and characteristics of the transferor private foundation. The transferee foundation shall not be treated as a newly created organization. See Treas. Reg. 1.507-3(a).

(2) A transfer of assets is described in section 507(b)(2) if it is made by a private

foundation to another private foundation pursuant to any liquidation, merger, redemption, recapitalization, or other adjustment, organization, or reorganization. A transfer of assets shall also include any organization or reorganization described in subchapter C of Chapter 1 of the IRC. See Treas. Reg. 1.507-3(c)(1).

(3) The meaning of the terms liquidation, merger, reorganization, redemption, and

recapitalization is determined by the law of the state in which the private foundation was incorporated or otherwise created. Most states have nonprofit or not-for-profit corporation statutes that are expressly applicable to charitable corporations. Among other things, the statutes usually deal with mergers or consolidations, dissolutions, and sales or other dispositions of assets of charitable corporations. If the private foundation is a trust, the charitable trust law of the state applies in determining the meaning of the terms.

(4) The terms other adjustment, organization, or reorganization shall include any

partial liquidation or any other significant disposition of assets to one or more private foundations, other than transfers for full and adequate consideration or distributions out of current income.

(5) The term "significant disposition of assets to one or more private foundations"

includes:

a. The dispositions to one or more private foundations for the taxable year,

and

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b. Where any disposition to one or more private foundations for the taxable

year is part of a series of related dispositions made during prior taxable years, the total of the related dispositions made during such prior taxable years, is 25% or more of the fair market value of the net assets of the foundation at the beginning of the taxable year or at the beginning of the first taxable year in which any of the series of related dispositions was made. See Treas. Reg. 1.507-3(c)(2).

(6) A significant disposition of assets may occur in a single taxable year or over the

course of two or more taxable years. A disposition not otherwise significant in relation to the fair market value of the foundation’s net assets may be a "significant disposition" when aggregated with other dispositions to private foundations in the same year and with "related" distributions in prior taxable years. The determination whether a "significant disposition" has occurred through a series of "related distributions " will be made based on "all the facts and circumstances of the particular case." See Treas. Reg. 1.507-3(c)(2).

(7) A transfer of assets described in Section 507(b)(2) does not constitute a

termination of the transferor's private foundation status under Section 507(a)(1) unless the transferor voluntarily gives notice pursuant to Section 507(a)(1). See Rev. Rul. 2002-28, 2002-1 C.B. 941.