Frequently Asked Questions
What is a private foundation?
Technically, it is a not-for-profit entity that can be controlled
by a person, family or business. It is organized exclusively
for charitable, educational, religious, scientific and literary
purposes under Section 501(c)(3) of the Internal Revenue Code.
The foundation must be officially recognized by the IRS in
order for contributions to it to be tax deductible. In practice,
a private foundation is a unique planned giving vehicle that
fosters family involvement, provides significant control over
assets and giving, and allows donors to receive an immediate
tax deduction for charitable donations that are made in the
Can I or members of my family be employed by my foundation?
Yes. By appointing children or other family members as officers
or directors, you will have the option of making the foundation
a family affair. However, paying yourself or family members
requires strict adherence to detailed IRS rules. To avoid
the potential for legal problems, you must consult with your
attorney before paying yourself or family members.
Can my family or I engage in transactions with the
The IRS strictly prohibits self dealing. Disqualified individuals
(the donor, lineal descendants and antecedents, e.g., parents,
children and their spouses, and people under their employment)
may not engage in transactions with the foundation except
to make donations to it, or under limited circumstances, to
receive fair market value compensation for services. Examples
of self dealing include:
- Purchasing items from or selling items to the foundation.
- Personal use of foundation assets or income.
- Borrowing money from the foundation.
- Retaining foundation assets (e.g., paintings) on private
Who can open a private foundation?
The founder must be a U.S. citizen or resident alien who is
at least 18 years old.
Who can a private foundation give money (make grants)
Private foundations typically carry out their philanthropy
by making grants to recognized public charities. This includes
churches and synagogues, educational, scientific and cultural
institutions, poverty relief agencies or any other organization
that qualifies as a 501(c)(3) charity according to the IRS.
Private foundations are generally precluded from making grants
to political campaigns or organizations that exist to influence
legislation and voting. In addition, Foundation Source ensures
that grants are in full compliance with the requirements of
the USA PATRIOT Act and OFAC (Office of Foreign Assets Control)
sanctions, which preclude organizations and individuals suspected
of, or known to be, engaging in criminal, terrorist, or other
illicit behavior from receiving financial contributions from
private foundations. (The Patriot Act and OFAC sanctions apply
to donor advised funds and individuals as well.)
Can a private foundation make grants for political
No. IRS rules generally prohibit private foundations from
making grants to political campaigns or to organizations that
exist to influence legislation and voting.
Can a private foundation own all or part of a family
Generally, no. The IRS has established rules against excess
business holdings to keep a private foundation from owning
a significant stake in a family business. We advise you to
consult with your legal or tax advisor on any business issues.
Can I sell family assets to my foundation?
No. The IRS strictly prohibits self-dealing. Donors, donors’
parents, children and spouses, and people under their employment
may not engage in transactions with the foundation, except
to make donations to it. Under limited circumstances, they
can receive compensation for their services at fair market
Tactical Wealth Advisors, LLP
Investment advisory services are provided through Tactical
Wealth Advisors, LLP a Registered Investment Advisor. The
information contained on this site is for educational purposes
only, it is not intended to be professional tax or legal advise;
consult a tax advisor about your specific situation.