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Abstract: 

IRC §4941 prohibits a private foundation from transacting with its insiders, referred to as “disqualified persons.” The prohibition applies straightforwardly when a private foundation proposes to deal directly with a disqualified person. However, the Code also prohibits indirect self-dealing. As the IRS acknowledges in a recent ruling, neither the Code nor the regulations actually contain a definition of “indirect self-dealing.” Outside of a narrow example, the regulations under IRC §4941 do not provide an affirmative definition, making it difficult to know what facts give rise to indirect self-dealing. However, the regulations do provide a list of safe harbors that are deemed not to constitute indirect self-dealing. This article reviews the most important of these safe harbors, then explores some examples of transactions that do constitute indirect self-dealing.

Keywords: IRC §4941(d)(1), Treas. Reg. §53.4941(d)-1(a); Moody v. Commissioner

Affiliations:  1: Strasburger & Price, LLP.