Transfer of All Rights Title and Interest

(1) To effectuate a transfer of "all of its rights, title, and interest in and to all of its

net assets" within the meaning of Treas. Reg. 1.507-2(a)(6), a transferor private foundation may not impose any material restriction or condition that prevents the transferee organization (the public charity) from freely and effectively employing the transferred assets for its exempt purposes. Whether a condition or restriction imposed upon a transfer is "material " must be determined from all the facts and circumstances of the transfer.

(2) Treas. Reg. 1.507-2(a)(7)(i) provides s4ignificant facts and circumstances to

consider regarding the transfer of rights, title, and interest of assets include whether the:

a. Transferee is the owner in fee of the transferred assets.

24

b. Transferred assets will be held and administered in a manner consistent

with its exempt purposes.

c. Governing body of the transferee has ultimate authority and control over the

transferred assets and income derived from them.

d. Governing body of the public charity is organized and operated

independently from the transferor. Relevant considerations in determining the independence of the transferee’s governing body include: whether the transferor or disqualified persons select members of the governing body of the transferee; whether the members of the governing body of the transferee are disqualified persons with respect to the transferor; whether the members of the governing body of the transferee are selected by public officials acting in their capacities as such; and, the length of time each member of the governing may serve as such.

(3) Treas. Reg. 1.507-2(a)(7)(iii) provides that the following factors will not be

considered "material" restrictions or conditions:

a. The fund is given the transferor’s name or similar designation or a name

that memorializes the creator of the foundation or his family.

b. The income or assets of the fund are to be used for a designated purpose

or a particular Section 509(a)(1), (2), or (3) organization and the use is consistent with the transferee’s exempt purpose.

c. The transferred assets are administered in a separate or identifiable fund,

some or all of the principal of which is not to be distributed for a specified period as, for example, a fund to endow a chair at a university. The transferee must be the legal and equitable owner of the fund and the governing body must exercise ultimate and direct authority and control over the fund.

d. The transferor requires that the transferred property be retained by the

transferee if the retention is important to the achievement of exempt purposes because of peculiar features of the property, as, for example, the transfer of a woodland preserve to be maintained as an arboretum for the benefit of the community.

(4) Treas. Reg. 1.507-2(a)(7)(iv) sets out certain factors that will be considered

"material" restrictions or conditions.

a. The transferor, a disqualified person with respect to it or a person or

committee designated by such a person, reserves the right to name the persons to which the transferee must distribute or to direct the timing of such distributions (unless the transferred assets will be held and administered in a manner consistent with its exempt purposes), as, for example, by power of appointment. See Treas. Reg. 1.507-2(a)(7)(iv)(A)(2)

• (3) for a listing of some specific factors that indicate whether the

reservation of such a right exists.

25

b. The terms of the transfer agreement require the public charity to take or

withhold action with respect to the transferred assets which furthers none of the transferee’s exempt purposes and would, if performed by the transferor, subject it to tax under Chapter 42 of the Code.

c. The transferee assumes or takes assets subject to leases, contractual

agreements or other liabilities of the transferor for purposes inconsistent with the purposes or best interests of the transferee, other than the payment of the transferor’s Chapter 42 taxes incurred prior to the transfer to the extent of the value of the assets transferred.

d. The transferee is required by any express or implied agreement or

restriction to retain investment assets transferred to it by the transferor.

e. An agreement is entered into giving the transferor or a disqualified person

with respect to it the right of first refusal with respect to transferred property unless acquired by the transferor subject to a right of first refusal prior to October 9, 1969.

f. An agreement is entered into between the transferee and the transferor establishing an irrevocable relationship with respect to maintenance or management of the assets transferred such as with banks or brokerage firms.