Private foundations are becoming a very popular tax-saving technique among families with large estates. This course has been designed to provide a basic but thorough discussion of private foundations and their federal tax compliance requirements. In that, the program covers how to determine an organization's status in the not-for-profit universe and the advantages and disadvantages of that status, including the multitude of rules regarding acts of self-dealing, mandatory distributions, excess business holdings, jeopardizing investments, and taxable expenditures.

Chapter 1 is an analysis of how private foundations come into existence, how they are different from public charities, and how taxpayers employ them to their tax and economic advantage. This chapter also includes commentary on Part I of the Form 990-PF.

Chapter 2 provides commentary on Parts II and III of the Form 990-PF. This covers how the assets and liabilities of private foundations are reported as well as the definition of a disqualified person.

Chapter 3 covers Parts IV, V, and VI of the Form 990-PF relating to the excise tax on net investment income. More specifically, this includes the requirements an organization must meet in order to reduce the excise tax on net investment income as well as the qualifications of an exempt operating foundation. Net investment income, gross investment income, capital gain net income and other related terms are defined.

Chapter 4 presents Parts VII-A through IX-B of the Form 990-PF. With that, the chapter covers self-dealing, distribution requirements, excess business holdings, jeopardizing investments, and taxable expenditures as well as the excise taxes that apply to each type of violation.

Chapter 5 discusses Parts X through XV of the Form 990-PF dealing with minimum investment return, distributable amount, qualifying distributions, undistributed income, private operating foundations and supplementary information.

Chapter 6 explains Parts XVI-A through XVII of the Form 990-PF concerning income-producing activities and information regarding transfers, transactions, and relationships with noncharitable exempt organizations.

The Appendix includes the pertinent 2007 IRS forms.

• Explain how private foundations come into existence

• Differentiate between a private foundation and a public charity

• Discuss the advantages and disadvantages of private foundation status

• Describe the different types of private foundations

• Identify a disqualified person in relation to a private foundation

• Define net investment income, gross investment income, capital gain net income as well as other related terms for purposes of the excise tax on net investment income

• Explain the requirements an organization must meet in order to reduce the excise tax on net investment income

• Identify organizations that are exempt from the excise tax on net investment income

• Identify an act of self-dealing and explain the excise taxes that apply to those who engage in self-dealing

• Explain the distribution requirements as well as the excise taxes that apply when a private foundation fails to meet those requirements

• Define minimum investment return, adjusted net income, qualifying distributions as well as other related terms for purposes of the excise tax on undistributed income

• Discuss the rules regarding excess business holdings and the excise taxes that apply

• Recognize a jeopardizing investment and explain the applicable penalties as well as the exception for program-related investments

• Identify a taxable expenditure and describe the sanctions imposed on a private foundation and its managers for engaging in certain prohibited transactions

• Categorize income as unrelated business income, amounts excluded by IRC §§512, 513, or 514, and as related or exempt function income

• Complete the Form 990-PF

John L. Norman, Jr., JD, is an attorney in private practice in Washington, D.C., where he specializes in closely held business organizations, as well as estate and financial planning. He is the former National Director of Taxation for the accounting firm Pannell Kerr Forster, and the former chair of PKF's International Tax Committee. He is also a member of the International Tax Planning Association. Previously, he was the Director of Tax Policy for Potomac Electric Power Company. He also taught at the College of William and Mary and George Washington University. Mr. Norman is a noted speaker and author of several publications in the area of federal taxation and he is a regular contributor to CPE Network. (Speaker)