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Abstract: 

The percentage ownership limitations imposed by the excess business holdings rules of IRC §4943 are fairly straightforward. This fact makes them stand out in this complex provision, but it can provide an easy way to avoid this penalty tax. Simply keeping the ownership of the foundation and its disqualified person group below 20% (35% if “control” of the business enterprise is held outside this group) will effectively prevent application of the tax on excess business holdings. This strategy will succeed despite the extreme complexity of the accompanying rules of IRC §4943 and the regulations once the holdings of both the family foundation and the disqualified person group are conclusively determined. Both need only to avoid acquiring more stock if such an acquisition would take the total holdings above the applicable limit.

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