This is Professor Russell James coming to you from Texas Tech University. Welcome to today's lecture on visual plan giving and the introduction to the law and taxation of charitable gift planning. Welcome to part three of private foundations: tax rules. This is Professor Russell James once a private foundation has been successfully created, the primary guidelines for its operation come from federal tax law. Tax law indirectly affects private foundations through the deductibility of gifts and directly through the taxation of investment income and levying of penalties for violations of IRS rules. Unlike other charitable entities, private foundations do pay taxes on net investment income and capital gains. However, this tax is relatively minimal, typically charged at the two percent rate. This two percent rate will drop to one percent if the foundation distributes charitable grants at least equal to its assets multiplied by its average percentage payout for the last five years, or less if the foundation is not that old, plus one percent of its net investment income. For a private foundation intending to distribute the same percentage of assets in charitable grants as it had done over the previous five years, this rule means that the payment of one percent of net investment income can go either to the IRS by payment of the full two percent standard excise tax, or to a public charity, thus reducing the IRS excise tax by one percent of net investment income. Although private foundations are not completely tax-exempt, the burden of a 1 percent or 2 percent tax is relatively minimal. This tax is paid on net investment income and net capital gains. However, the tax is not paid on any unrelated business income, which is taxed at different rates. Net investment income is the reduction of gross investment...
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Irs 990-pf instructions Form: What You Should Know
Dec 20, 2024 — Federal gift tax (Gift Tax Reform) Title 26. Gift Taxes Go to Gifts to Others Title 26.
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