To determine whether a person`s total contributions and legacies represent more than two per cent of the total contributions and legacies received from a private foundation, both the sum of the amounts received by the foundation and the sum of the amounts paid and inherited by the person from the last day of each taxation year is determined. Although the decision is made on the last day of the foundation`s tax year, from day one, the foundation receives a donation large enough to make the donor a significant contributor, a significant contributor. Each deposit or bequest is valued at its market value on the date it is received by the Foundation. A person`s gifts include all contributions and legacies made by that person and their spouse. A significant contributor includes any person who has contributed or bequeathed a total amount of more than $5,000 to the private foundation if the amount is greater than two per cent of the total contributions and legacies received by the foundation from its inception until the end of the taxation year of the foundation in which the contribution or inheritance is received from that person. For a trust, an essential contributor includes the creator of the trust. In no case, however, does the term include a government entity. The term contribution includes gifts and grants to the Foundation, as well as legacies, inventions, legacies or transfers, as described in the Estate tax and gifts Regulations. Whether a person is a significant contributor at the end of each taxation year of the Foundation is determined on the basis of the respective amounts of all contributions received and the total amount received by a particular person up to that date.
Significant contributor status begins when the donor first passes the 5,000 to two percent test. Once a person is a significant contributor to a private foundation, that person usually remains an essential contributor, although the person might not be classified as such if a decision was made at a later date. For example, although a person`s total contributions and legacies are less than two percent of the total amount received by a private foundation, the individual generally remains a significant contributor to the foundation. Special rules. A significant contributor does not include a corporation described in section 509(a)(1), (2) or (3) or an organization that is wholly owned by that corporation. In addition, only for the purposes of section 4941 excise duty on self-trading, a significant contributor does not include any other organization described in section 501(c)(3) (other than an organization with status under section 509(a)(4)). In the case of a private foundation, institutions excluded from the definition of substantial contributor are also excluded from the definition of disqualified person. A person is related to a significant contributor for the purposes of this rule if that person`s relationship with the contributor would make that other person a disqualified person with respect to the contributor.
If the Contributor is a corporation, the term “related person” also includes any officer or director of the corporation. However, a person ceases to be a significant contributor at the end of the tax year of a private foundation if: An official website of the United States government .. .