Transferee Liability To Private Organizations

A termination under sec­tion 507(a) does not result from either a transfer of all its assets or a significant disposition of its assets by a private foundation unless it chooses to terminate under section 507(a)(1), or an involuntary termination occurs. If a private foundation incurs any liability for the private foundation excise taxes before or in connection with the transfer, transferee liability may be ap­plied against the transferee organization for pay­ment of those taxes.

Example. The White Foundation is a private foundation that had net assets of $100,000 on January 1, 1987. In 1987, in addition to distribu­tions made out of current income, the White Foundation transferred $10,000 to the Rose Foundation, $10,000 to the Black Foundation and $10,000 to the Green Foundation, all of which are private foundations. Therefore, the White Foundation made a section 507(b)(2) dis­tribution because it disposed of more than 25 percent of the fair market value of its net assets on January 1, 1987.