Treasury Regulations (26 C.F.R.)
26 CFR § 53.4944-2
Additional taxes.
# (a) On the private foundation.
Section 4944(b)(1) of the Code imposes an excise tax in any case in which an initial tax is imposed by section 4944(a)(1) and § 53.4944-1(a) on the making of a jeopardizing investment by a private foundation and such investment is not removed from jeopardy within the taxable period (as defined in section 4944(e)(1)). The tax imposed under section 4944(b)(1) is to be paid by the private foundation and is at the rate of 25 percent of the amount of the investment. This tax shall be imposed upon the portion of the investment which has not been removed from jeopardy within the taxable period.
# (b) On the management.
Section 4944(b)(2) of the Code imposes an excise tax in any case in which an additional tax is imposed by section 4944 (b)(1) and paragraph (a) of this section and a foundation manager has refused to agree to part or all of the removal of the investment from jeopardy. The tax imposed under section 4944(b)(2) is at the rate of 5 percent of the amount of the investment, subject to the provisions of section 4944(d) and § 53.4944-4. This tax is to be paid by any foundation manager who has refused to agree to the removal of part or all of the investment from jeopardy, and shall be imposed upon the portion of the investment which has not been removed from jeopardy within the taxable period.
# (c) Examples.
The provisions of this section may be illustrated by the following examples:
Example 1.
X is a foundation manager of Y, a private foundation. On the advice of X, Y invests $5,000 in the common stock of corporation M. Assume that both X and Y are liable for the taxes imposed by section 4944(a) on the making of the investment. Assume further that no part of the investment is removed from jeopardy within the taxable period and that X refused to agree to such removal. Y will be liable for an additional tax of $1,250 (i.e., $5,000 × 25%). X will be liable for an additional tax of $250 (i.e., $5,000 × 5%).
Example 2.
Assume the facts as stated in Example (1), except that X is not liable for the tax imposed by section 4944(a)(2) for his participation in the making of the investment, because such participation was not willful and was due to reasonable cause. X will nonetheless be liable for the tax of $250 imposed by section 4944(b)(2) since an additional tax has been imposed upon Y and since X refused to agree to the removal of the investment from jeopardy.
Example 3.
Assume the facts as stated in Example (1), except that Y removes $2,000 of the investment from jeopardy within the taxable period, with X refusing to agree to the removal from jeopardy of the remaining $3,000 of such investment. Y will be liable for an additional tax of $750, imposed upon the portion of the investment which has not been removed from jeopardy within the taxable period (i.e., $3,000 × 25%). Further X will be liable for an additional tax of $150, also imposed upon the same portion of the investment (i.e., $3,000 × 5%).
[T.D. 7240, 37 FR 28747, Dec. 27, 1972, as amended by T.D. 8084, 51 FR 16302, May 2, 1986]
Source: view the official text
In this part (40 sections)
- 53.4941(e)-1 · (e)-1 Definitions.
- 53.4941(f)-1 · (f)-1 Effective dates.
- 53.4942(a)-1 · (a)-1 Taxes for failure to distribute income.
- 53.4942(a)-2 · (a)-2 Computation of undistributed income.
- 53.4942(a)-3 · (a)-3 Qualifying distributions defined.
- 53.4942(b)-1 · (b)-1 Operating foundations.
- 53.4942(b)-2 · (b)-2 Alternative tests.
- 53.4942(b)-3 · (b)-3 Determination of compliance with operating…
- 53.4943-1 · General rule; purpose.
- 53.4943-2 · Imposition of tax on excess business holdings of private…
- 53.4943-3 · Determination of excess business holdings.
- 53.4943-4 · Present holdings.
- 53.4943-5 · Present holdings acquired by trust or a will.
- 53.4943-6 · Five-year period to dispose of gifts, bequests, etc.
- 53.4943-7 · Special rules for readjustments involving grandfathered…
- 53.4943-8 · Business holdings; constructive ownership.
- 53.4943-9 · Business holdings; certain periods.
- 53.4943-10 · Business enterprise; definition.
- 53.4943-11 · Effective/applicability date.
- 53.4944-1 · Initial taxes.
- 53.4944-2 · Additional taxes.
- 53.4944-3 · Exception for program-related investments.
- 53.4944-4 · Special rules.
- 53.4944-5 · Definitions.
- 53.4944-6 · Special rules for investments made prior to January 1, 1970.
- 53.4945-1 · Taxes on taxable expenditures.
- 53.4945-2 · Propaganda influencing legislation.
- 53.4945-3 · Influencing elections and carrying on voter registration…
- 53.4945-4 · Grants to individuals.
- 53.4945-5 · Grants to organizations.
- 53.4945-6 · Expenditures for noncharitable purposes.
- 53.4946-1 · Definitions and special rules.
- 53.4947-1 · Application of tax.
- 53.4947-2 · Special rules.
- 53.4948-1 · Application of taxes and denial of exemption with respect…
- 53.4951-1 · Black lung trusts—taxes on self-dealing.
- 53.4952-1 · Black lung trusts—taxes on taxable expenditures.
- 53.4955-1 · Tax on political expenditures.
- 53.4958-0 · Table of contents.
- 53.4958-1 · Taxes on excess benefit transactions.