§4947 Application of Taxes to Certain Nonexempt Trusts

Summary

Treats certain trusts that are not tax-exempt like charities for many tax rules when all of the trust’s remaining interests are used for charitable purposes and a tax deduction was allowed for amounts placed in the trust. When that happens, the trust is treated like a 501(c)(3) organization for the listed tax rules, and for one rule it is treated as if it was organized on the date it first met these conditions. If a trust is only partly charitable but has amounts for which a deduction was allowed, several private-foundation rules apply to those deductible amounts. Those rules cover things like ending private-foundation status, required governing terms, self-dealing, excess business holdings, risky investments, and taxable expenditures. The private-foundation rules do not apply to payable amounts to income beneficiaries unless a special deduction rule was used, to non-deductible amounts that are kept separately from deductible amounts, or to amounts transferred into trust before May 27, 1969. Segregated amounts must be separately accounted for. The Treasury must write rules to carry this out. If amounts are segregated, certain asset-value limits apply. Two exceptions mean the rules on excess business holdings and risky investments do not apply if either deductible amounts are at most 60% of the trust’s value and income is all charitable, or deductions were only for remainder beneficiaries. Also one rule about termination of private-foundation status does not apply after a qualified ESOP stock transfer.