Taxable Transfers

(1) Unless a private foundation gives notice under Section 507(a)(1) to terminate its

status, a transfer of assets described in Section 507(b)(2) will not constitute a termination of the transferor’s private foundation status. However, such transfer must satisfy the requirements of all pertinent provisions of Chapter 42 of the IRC. See Treas. Reg.1.507-3(d).

Note: For example, if the transfer constitutes a taxable expenditure as defined in Section 4945, the transferor is liable for the Chapter 42 tax that is incurred.

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(2) If a transfer described in Section 507(b)(2) constitutes a willful and flagrant

violation of Chapter 42, as described in Section 507(a)(2)(A), then the provisions of Section 507(a)(2) dealing with involuntary terminations are applicable, rather than the provisions of Section 507(b)(2). In that event, the transferor foundation would be subject to Section 507(c) tax. See Treas. Regs. 1.507-3(d) and 1.507-4(b).