Insider Transaction Traps for the Unwary
Welcome to EO Radio Show - Your Nonprofit Legal Resource. I'm Cynthia Rowland, and today I'm joined by David Sacarelos, a principal at Baker Tilly. We do a deep dive into the penalties under the Internal Revenue Code sections that apply to insider transactions involving private foundations. Using a recently issued IRS Chief Counsel memorandum, we look at the circumstances of loans by a private foundation that led to significant penalties for indirect self-dealing and jeopardizing investments.
Show Notes:
David M. Sacarelos, CPA, CGMA, Principal, Baker Tilly US, LLP
EO Radio Show #117: REFRESH Nonprofit Basics: Insider Transactions and Nonprofits
Farella YouTube podcast channel
Clarifying Notes:
(17:06) The $20,000 maximum first-tier tax imposed on foundation managers is not indexed for inflation.
(20:59) Per Rev. Ruling 78-76, a private foundation trustee was determined to have participated in a self-dealing transaction both as a disqualified person and as a foundation manager. Consequently, he was found liable for both the tax imposed on self-dealing under IRC Sec. 4941(a) and the tax imposed on foundation managers under IRC Sec. 4941(a)(2). Depending on the facts and circumstances, it is possible to be taxed both as foundation manager and as a disqualified person.
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DISCLAIMER: This podcast is for general informational purposes only. It is not intended to be, nor should it be interpreted as, legal advice or opinion.