Who are Disqualified Persons?

The self-dealing rules, transactions and taxes under IRC 4941 apply to Charitable Remainder Trusts, Charitable Lead Trusts and Private Foundations.  There are two elements of self-dealing: A disqualified person and a self-dealing transaction.  This FAQ describes disqualified persons.

  1. Substantial Contributors IRC 4946(a)(1)(A).
  2. Foundation Managers IRC 4946(a)(1)(B).
  3. 20% Owners IRC 4946(b)(2).
  4. Family Members IRC 4946(a)(1)(D).  A member of the family of a substantial contributor, a foundation manager, or a 20% owner is a disqualified person.  Family members include the individuals spouse, ancestors, children, grandchildren, great grandchildren and the spouses of children, grandchildren and great grandchildren (IRC 4946(d)).  Note that siblings are not included.
  5. Corporations and Other Entities IRC 4946(a)(1)(E),(F) and (G).
  6. Government Officials IRC 4946(a)(1)(I).
  7. Exceptions and Special Rules.
  • Disqualified persons do not include any charitable organization (Treas. Reg. 53.4946-(1)(a)(8).
  • In determining the voting power of a corporation, profits interest in a partnership and beneficial interest in an estate or trust, the ownership attribution rules apply (IRC 4946(a)(3) & (4).
  • A disqualified person participates in an act of self-dealing if they take part in the transaction, alone or with others, or directs any person to do so.
  • Participation includes silence or inaction of a foundation manager, as well as their affirmative acts.  A manager has not participated when they have opposed the act in a manner consistent with fulfillment of their foundation responsibilities. 

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