IRS approves consolidation of related private foundations

Plain-English summary

A private foundation organized as a charitable trust proposed to transfer all
its assets to a related private foundation organized as a nonprofit
corporation. The foundations were controlled by the same individuals and made
the same types of grants. The transferor would retain only a reserve for final
expenses, transfer the remainder, and then give notice of voluntary termination
after it held no assets. The IRS ruled that the transfer qualified as a section
507(b)(2) reorganization and approved favorable treatment under the private
foundation termination, investment-income, self-dealing, distribution,
jeopardizing-investment, taxable-expenditure, and filing rules. The recipient
would inherit relevant tax and distribution attributes, and the transferor's
section 507(c) termination tax would be zero if it had no assets when it gave
notice.

Ruling snapshot

• Question: What federal tax consequences follow when one private foundation transfers all its assets to a commonly controlled private foundation and then terminates?
• Outcome: Approved
• Key authorities: IRC §§ 507, 4940, 4941, 4942, 4944, 4945, and 6033; Treas. Reg. § 1.507-3; Rev. Rul. 2002-28

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 202630006
Release Date: 7/24/2026
Index Number: 507.00-00, 4940.00-00,
4941.00-00, 4942.00-00, 4944.00-00,
4945.00-00, 6033.00-00, 6043.00-00

Third Party Communication: None
Date of Communication: Not Applicable

Person To Contact:
--------------------, ID No. ------------------
Telephone Number:
--------------------

----------------------
-------------------------------------------
--------------------------------------

Refer Reply To:
CC:EEE:EOET:EO3
PLR-118744-25

Date:
April 23, 2026

LEGEND

Transferring Foundation = -----------------------------------------------
Recipient Foundation = -----------------------------------------------
Corporation A = --------------------
Date 1 = --------------------------
Date 2 = -------------------
Incorporator = -------------------

Dear ------------------:

This letter ruling is in response to a request from your authorized representative,
submitted on October 27, 2025, requesting rulings under sections 507, 4940, 4941,
4942, 4944, 4945, 6033, 6043 of the Internal Revenue Code.

FACTS

Both Transferring Foundation and Recipient Foundation (collectively, the “Foundations”)
are recognized as exempt organizations described in section 501(c)(3) and classified as
private foundations under section 509(a). The Foundations are not operating
foundations within the meaning of section 4942(j)(3).

Transferring Foundation was established by Corporation A under a trust indenture dated
Date 1. Recipient Foundation was incorporated on Date 2 by Incorporator, an agent of
Corporation. The Foundations are controlled by the same individuals. They share
offices and support staff. Transferring Foundation currently makes grants to
organizations described in section 501(c)(3). Recipient Foundation will make the same
types of grants.

PLR-118744-25
2

Transferring Foundation has determined that, under state and local law, operating as a
nonprofit corporation is preferable to operating as a charitable trust and that
consolidating operations with Recipient Foundation would allow the Foundations to
carry out their grantmaking activities more effectively.

To carry out this consolidation, Transferring Foundation proposes to initially transfer
substantially all its assets to Recipient Foundation, retaining a reserve for final
expenses, including taxes owed, if any. After payment of its final expenses, Transferring
Foundation will transfer the remaining assets to Recipient Foundation (together with the
initial transfer, the “Asset Transfer”). The Asset Transfer will not include current income.
Recipient Foundation will not provide any consideration for the transfer. Transferring
Foundation represents that the Asset Transfer is permitted by the Foundations’
respective trust agreement or articles of incorporation.

Following the Asset Transfer, Transferring Foundation will retain no assets and will not
engage in any activities. It will file a final Form 990-PF for the year of transfer and will
notify the Internal Revenue Service (the “Service”) of its intent to terminate its private
foundation status pursuant to section 507(a)(1) no earlier than one day after the transfer
of the last of its assets to Recipient Foundation. Recipient Foundation will use the
transferred assets in furtherance of Transferring Foundation’s exempt purpose.

Transferring Foundation represents the legal, accounting, and other expenses paid
by the Foundations in connection with the Asset Transfer, including the Foundations’
requests for private letter rulings, are reasonable, necessary, and consistent with
ordinary business care and prudence. Additionally, Transferring Foundation represents
that it has not committed any willful repeated acts (or failures to act), nor any willful and
flagrant act (or failure to act), giving rise to liability under chapter 42. Finally,
Transferring Foundation represents that it does not have, and will not have at the time
of the Asset Transfer, any outstanding grants which require expenditure responsibility
under section 4945(d)(4)(B).

RULINGS REQUESTED, LAW, AND ANALYSIS

Requested Ruling 1: The Asset Transfer will qualify as a transfer of assets described in
section 507(b)(2).

Section 507(b)(2) provides that in the case of a transfer of assets of any private
foundation to another private foundation pursuant to any liquidation, merger,
redemption, recapitalization, or other adjustment, organization, or reorganization, the
transferee foundation shall not be treated as a newly created organization.

Treas. Reg. § 1.507-3(c)(1) describes the terms “other adjustment, organization, or
reorganization” as including any significant distribution of assets to one or more private
foundations, other than transfers for full and adequate consideration or distributions out
of current income. A significant disposition of assets may occur in a single taxable year
or over the course of two or more taxable years. Treas. Reg. § 1.507-3(c)(2) defines the

PLR-118744-25
3

term “significant disposition of assets to one or more private foundations” to include any
disposition (or series of related dispositions) where the aggregate value transferred is
25 percent or more of the fair market value of the net assets of the transferor foundation
at the beginning of the taxable year (or at the beginning of the first taxable year in which
any of a series of related dispositions was made).

The Asset Transfer will be a significant disposition. Transferring Foundation will transfer
all its assets to Recipient Foundation and will not receive any consideration for the
amounts transferred. Transferring Foundation represents that the Asset Transfer will not
be out of current income. Accordingly, the Asset Transfer will be a transfer described in
section 507(b)(2). Because the Asset Transfer is described in section 507(b)(2),
Recipient Foundation shall not be treated as a newly created organization. Additionally,
Recipient Foundation will be treated as possessing the attributes and characteristics of
Transferring Foundation described in Treas. Reg. § 1.507-3(a)(2)-(4).

Requested Ruling 2: The Asset Transfer will not terminate Transferring Foundation’s
private foundation status and will not cause any liability for the termination tax under
section 507(c).

Section 507(a) provides that, except as provided in subsection (b), the status of any
organization as a private foundation shall be terminated only if (1) it notifies the
Secretary of its intent to accomplish such a termination, or (2) with respect to such
organization, there have been either willful repeated acts (or failures to act), or a willful
and flagrant act (or failure to act), giving rise to liability for tax under chapter 42, and the
Secretary notifies such organization that it is liable for the tax imposed by section
507(c), and either such organization pays the tax (or any portion not abated under
section 507(g)) or the entire amount of such tax is abated under section 507(g).

Section 507(c) imposes an excise tax on an organization whose private foundation
status is terminated pursuant to section 507(a) equal to the lower of (1) the aggregate
tax benefit that has resulted from the private foundation’s tax-exempt status under
section 501(c)(3), or (2) the value of the net assets of the foundation.

Treas. Reg. § 1.507-3(d) states that unless a private foundation voluntarily gives notice
pursuant to section 507(a)(1), a transfer of assets described in section 507(b)(2) will not
constitute a termination of the transferor’s private foundation status under section
507(a)(1). See also Treas. Reg. § 1.507-1(b)(6) and Rev. Rul. 2002-28, 2002-1 C.B.

941. Treas. Reg. § 1.507-4(b) states that private foundations that make transfers
described in section 507(b)(2) are not subject to the tax imposed under section 507(c)
with respect to such transfers unless the provisions of section 507(a) become
applicable.

Transferring Foundation has not notified the Service of an intent to terminate its status
as a private foundation pursuant to section 507(a)(1) and represents that it will not do so
prior to the completion of the Asset Transfer. Transferring Foundation also represents
that it has not willfully engaged in repeated acts (or failures to act) or committed a willful

PLR-118744-25
4

and flagrant act (or failure to act) which would give rise to tax under chapter 42. See
section 507(a)(2). The Asset Transfer itself will not constitute such an act. Since the
Asset Transfer is described in section 507(b)(2), and because Transferring Foundation’s
status as a private foundation will otherwise not be terminated pursuant to section
507(a) prior to the completion of the Asset Transfer, the Asset Transfer will not
terminate Transferring Foundation’s private foundation status and will not cause any
liability under section 507(c). Following the Asset Transfer, Transferring Foundation will
be eligible to voluntarily terminate its private foundation status through the voluntary
termination procedures under section 507(a)(1).

Requested Ruling 3: Transferring Foundation’s voluntary termination after completion of
the Asset Transfer will not result in imposition of tax under section 507(c).

As stated above, section 507(c) imposes an excise tax on an organization whose
private foundation status is terminated pursuant to section 507(a) equal to the lower of
(1) the aggregate tax benefit that has resulted from the private foundation’s tax-exempt
status under section 501(c)(3), or (2) the value of the net assets of the foundation.
Treas. Reg. § 1.507-7(b)(1) states that in the case of a termination under section
507(a)(1), the date referred to in Treas. Reg. § 1.507-7(a)(1), for purposes of
determining the value of net assets, shall be the date on which the terminating
foundation gives the notification described in section 507(a)(1).

Rev. Rul. 2002-28 presents three situations in which a transferor private foundation
transfers all of its assets to one or more transferee private foundations. Rev. Rul. 2002-
28 states that, in each situation presented, if the transferor foundation gives notice to
the Service of its intent to terminate, then the section 507(c) tax applies on the date
such notice is given. Thus, in each situation, if the transferor foundation provides notice
at least one day after it transfers all of its assets, the tax imposed by section 507(c) will
be zero.

Transferring Foundation represents that it will notify the Service of its intent to
voluntarily terminate its private foundation status under section 507(a)(1) no earlier than
one day after the completion of the Asset Transfer. Transferring Foundation further
represents that following the Asset Transfer, it will retain no assets. Therefore, as long
as Transferring Foundation has no assets on the date of notification, the tax imposed by
section 507(c) will be zero.

Requested Ruling 4: The transfer will not give rise to any net investment income
pursuant to section 4940.

Section 4940(a) imposes an excise tax on a private foundation's net investment income
for the taxable year. Section 4940(c)(1) defines net investment income as the amount
by which the sum of the gross investment income and the capital gain net income
exceeds the deductions allowed under section 4940(c)(3). Section 4940(c)(2) provides,
in part, that for purposes of section 4940, the term “gross investment income” means
the gross amount of income from interest, dividends, rents, payments with respect to

PLR-118744-25
5

securities loans, and royalties. Section 4940 does not define “capital gain net income,”
but section 4940(c)(1) provides that net investment income is generally determined
under the principles of subtitle A.

Rev. Rul. 2002-28 presents situations where a private foundation transfers all of its
assets to transferee private foundations that are effectively controlled (within the
meaning of the regulations under section 507), directly or indirectly by the same person
who effectively controlled the transferor private foundations. The ruling concludes that
the transfers do not constitute investments of the transferor for purposes of section
4940; therefore, the transfers do not give rise to net investment income subject to tax
under section 4940(a).

As in Rev. Rul. 2002-28, the Asset Transfer does not constitute an investment for the
purposes of section 4940. Accordingly, the proposed Asset Transfer to Recipient
Foundation will not result in the production of net investment income and will not result
in the imposition of tax under section 4940 on Transferring Foundation.

Requested Ruling 5: Recipient Foundation may use any excess tax paid by Transferring
Foundation under section 4940 to offset Recipient Foundation’s tax liability under
section 4940.

Treas. Reg. § 1.507-3(a)(9)(i) states that if a private foundation transfers all of its net
assets to one or more private foundations which are effectively controlled by the same
persons which effectively controlled the transferor private foundation, for purposes of
chapter 42 and sections 507 through 509 such a transferee private foundation shall be
treated as if it were the transferor.

Rev. Rul. 2002-28 holds that where the transferor foundation transfers all its assets to
one or more private foundations effectively controlled by the same persons that
effectively control the transferor, any excess section 4940 tax paid by the transferor may
be used by the transferee to offset the transferee’s section 4940 tax liability.

Transferring Foundation will transfer all its assets to Recipient Foundation in the Asset
Transfer. Moreover, both Transferring Foundation and Recipient Foundation are
effectively controlled by the same persons. Therefore, Recipient Foundation may use
any excess tax paid by Transferring Foundation under section 4940 to offset Recipient
Foundation’s tax liability under section 4940.

Requested Ruling 6: The Asset Transfer, and the payment of reasonable expenses to
effect the Asset Transfer, will not be considered self-dealing and will not create any tax
obligation under section 4941.

Section 4941(a)(1) imposes taxes on each act of self-dealing between a disqualified
person and a private foundation. Section 4946(a)(1) defines the term “disqualified
person.” Treas. Reg. § 53.4946-1(a)(8) provides that the term “disqualified person” does
not include organizations that are exempt under section 501(c)(3).

PLR-118744-25
6

In each situation presented in Rev. Rul. 2002-28, the transferee foundations are
recognized as exempt from federal income tax under section 501(c)(3) and classified as
private foundations under section 509(a). Rev. Rul. 2002-28 states, in part, that
because the transfers in question are to section 501(c)(3) organizations, which are not
treated as disqualified persons for purposes of section 4941, the transfers do not
constitute self-dealing transactions and are not subject to tax under section 4941(a)(1).

Because Recipient Foundation is recognized by the IRS as an organization described in
section 501(c)(3) and therefore not a disqualified person, the Asset Transfer (and
Transferring Foundation’s payment of reasonable expenses related to the transaction)
will not constitute an act of self-dealing.

Requested Ruling 7: Transferring Foundation’s distributable amount and qualifying
distributions under section 4942 for the tax year in which the Asset Transfer occurs will
be carried over to Recipient Foundation, and Transferring Foundation will not need to
separately meet the qualifying distribution requirements under section 4942 for the tax
year in which the transfer occurs.

Section 4942(a) generally imposes a tax on the undistributed income of a private
foundation for any taxable year which has not been distributed before the first day of the
second (or any succeeding) taxable year following such taxable year. Section 4942(c)
defines “undistributed income” for any taxable year as the amount by which the
distributable amount for such taxable year exceeds the qualifying distributions made out
of such distributable amount for such taxable year. Section 4942(g)(1)(A) defines
“qualifying distribution” generally as any amount (including that portion of reasonable
and necessary administrative expenses) paid to accomplish one or more purposes
described in section 170(c)(2)(B), but a qualifying distribution does not include a
contribution to an organization controlled directly or indirectly by the foundation or by
one or more disqualified persons with respect to the foundation.

Treas. Reg. § 1.507-3(a)(5) provides that, except as provided in § 1.507-3(a)(9), a
private foundation making a transfer described in section 507(b)(2) must satisfy its
distribution requirements under section 4942 for the taxable year in which the transfer is
made. As stated above, Treas. Reg. § 1.507-3(a)(9)(i) provides that if a private
foundation transfers all of its net assets to one or more private foundations which are
effectively controlled by the same persons which effectively controlled the transferor
private foundation, for purposes of chapter 42 and sections 507 through 509, such a
transferee private foundation shall be treated as if it were the transferor.

Rev. Rul. 2002-28 holds that where, by reason of Treas. Reg. § 1.507-3(a)(9)(i), a
transferee private foundation is treated as though it were the transferor for purposes of
section 4942, a transfer to the transferee foundation is not treated as a qualifying
distribution of the transferor foundation. Rather, the transferee foundation assumes all
obligations with respect to the transferor's “undistributed income” within the meaning of
section 4942(c), if any, and reduces its own distributable amount under section 4942(d)
by the transferor foundation's excess qualifying distributions under section 4942(i).

PLR-118744-25
7

Pursuant to Treas. Reg. § 1.507-3(a)(9)(i), Recipient Foundation would be treated as
Transferring Foundation for purposes of chapter 42, including section 4942.
Accordingly, the Asset Transfer would not be treated as a qualifying distribution of
Transferring Foundation. Transferring Foundation’s distributable amount and qualifying
distributions under section 4942 for the tax year in which the Asset Transfer occurs will
be carried over to Recipient Foundation. Recipient Foundation will be responsible for
satisfying Transferring Foundation’s remaining distribution requirement for the tax year,
if any, and Transferring Foundation will not need to separately meet the qualifying
distribution requirements under section 4942 for the tax year in which the transfer
occurs.

Requested Ruling 8: The Asset Transfer will not be a jeopardizing investment within the
meaning of section 4944 and will not trigger any tax under section 4944.

Section 4944(a)(1) imposes a tax on any amount invested by a private foundation in a
manner that jeopardizes the carrying out of any of the foundation's exempt purposes.
Neither section 4944 nor the regulations thereunder define “invest” or “investment.”
However, as held in Rev. Rul. 2002-28 in the context of applying sections 507(b)(2) and
4944 to a transfer of all of a private foundation's assets to one or more other private
foundations that are effectively controlled by the same persons effectively controlling the
transferor foundation, section 507(b)(2) transfers do not constitute investments for
purposes of section 4944. Accordingly, the Asset Transfer will not constitute a
jeopardizing investment and will not be subject to tax under section 4944(a)(1).

Requested Ruling 9: The Asset Transfer will not be a taxable expenditure under section
4945 and no expenditure responsibility requirements must be exercised under section
4945(d)(4) or (h) with respect to the Asset Transfer. The payment of legal, accounting,
and other expenses incurred in connection with the Asset Transfer, including this ruling
request, will also not be taxable expenditures under section 4945.

Section 4945(a) imposes a tax on each “taxable expenditure” of a private foundation.
Section 4945(d)(4) provides that the term “taxable expenditure” includes any amount
paid or incurred by a private foundation as a grant to a private non- operating foundation
unless the grantor foundation exercises expenditure responsibility with respect to such
grant in accordance with section 4945(h).

Treas. Reg. § 53.4945-6(c)(3) allows a private foundation to transfer its assets to
exempt organizations described in section 501(c)(3), including private foundations,
pursuant to section 507(b)(2), without the transfers being taxable expenditures under
section 4945(d)(5). As discussed, Treas. Reg. § 1.507-3(a)(9)(i) provides that if a
private foundation transfers all of its net assets to one or more private foundations which
are effectively controlled by the same person or persons which effectively controlled the
transferor private foundation, for purposes of chapter 42 and sections 507 through 509
such a transferee private foundation shall be treated as if it were the transferor. Rev.
Rul. 2002-28 provides that because each transferor foundation transfers all its assets to
private foundations effectively controlled by the same persons that effectively control the

PLR-118744-25
8

transferor foundation, the transferee foundations are treated as if they were the
transferor for purposes of section 4945. Because the transferee foundations are treated
as though they were the transferor foundation rather than as recipients of expenditure
responsibility grants, there are no expenditure responsibility requirements under section
4945 that must be exercised with respect to the Asset Transfer to Recipient Foundation
and the Asset Transfer will not be a taxable expenditure.

Treas. Reg. § 53.4945-6(b)(2) provides that legal, administrative, and other expenses
incurred by a private foundation are not taxable expenditures if the foundation can
demonstrate that such expenses were paid or incurred in the good faith belief that they
were reasonable and that the payment or incurrence of such expenses in such amounts
was consistent with ordinary business care and prudence. Transferring Foundation
represents that the legal, accounting, and other expenses paid in connection with this
ruling request and in effectuating the proposed transfer are reasonable, necessary, and
consistent with ordinary business care and prudence. Therefore, these payments will
also not constitute taxable expenditures under section 4945.

Requested Ruling 10: Transferring Foundation will not be required to file Form 990-PF
for any taxable year following the taxable year in which the Asset Transfer concludes.

Treas. Reg. § 1.507-1(b)(9) states that a private foundation which transfers all of its net
assets is required to file the annual information return required by section 6033, and the
foundation managers are required to file the annual report of a private foundation
required by section 6056, for the taxable year in which such transfer occurs. However,
neither such foundation nor its foundation managers will be required to file such returns
for any taxable year following the taxable year in which the last of any such transfers
occurred, if at no time during the subsequent taxable years in question the foundation
has either legal or equitable title to any assets or engages in any activity. See also Rev.
Rul. 2002-28.

Therefore, Transferring Foundation will not be required to file Form 990-PF for any
taxable year subsequent to the taxable year in which the Asset Transfer occurs, as long
as it has no assets and engages in no activity.

RULINGS

Based on the foregoing, and assuming the accuracy of the facts and representations set
forth herein, we rule as follows:

   1) The Asset Transfer will qualify as a transfer of assets described in section
      507(b)(2).
   2) The Asset Transfer will not terminate Transferring Foundation’s private
      foundation status and will not cause any liability for the termination tax under
      section 507(c).
   3) Transferring Foundation’s voluntary termination after completion of the Asset
      Transfer will not result in imposition of tax under section 507(c).

PLR-118744-25
9

   4) The Asset Transfer will not give rise to any net investment income pursuant to
      section 4940.
   5) Recipient Foundation may use any excess tax paid by Transferring Foundation
      under section 4940 to offset Recipient Foundation’s tax liability under section
      4940.
   6) The Asset Transfer, and the payment of reasonable expenses to effect the Asset
      Transfer, will not be considered self-dealing and will not create any tax obligation
      under section 4941.
   7) Transferring Foundation’s distributable amount and qualifying distributions under
      section 4942 for the tax year in which the Asset Transfer occurs will be carried
      over to Recipient Foundation, and Transferring Foundation will not need to
      separately meet the qualifying distribution requirements under section 4942 for
      the tax year in which the transfer occurs.
   8) The Asset Transfer will not be a jeopardizing investment within the meaning of
      section 4944 and will not trigger any tax under section 4944.
   9) The Asset Transfer will not be a taxable expenditure under section 4945 and no
      expenditure responsibility requirements must be exercised under section
      4945(d)(4) or (h) with respect to the Asset Transfer. The payment of legal,
      accounting, and other expenses incurred in connection with the Asset Transfer,
      including this ruling request, will also not be taxable expenditures under section
      4945.
   10) Transferring Foundation will not be required to file Form 990-PF for any taxable
      year following the taxable year in which the Asset Transfer concludes.

The rulings contained in this letter are based upon information and representations
submitted by or on behalf of Transferring Foundation and accompanied by penalty of
perjury statements executed by an individual with authority to bind Transferring
Foundation and upon the understanding that there will be no material changes in the
facts. While this office has not verified any of the material submitted in support of the
request for these rulings, it is subject to verification on examination. The Associate Chief
Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes) will
revoke or modify a letter ruling and apply the revocation retroactively if there has been a
misstatement or omission of controlling facts; the facts at the time of the transaction are
materially different from the controlling facts on which the ruling was based; or, in the
case of a transaction involving a continuing action or series of actions, the controlling
facts change during the course of the transaction. See Rev. Proc. 2026-1, 2026-1 I.R.B.
1, section 11.05.

This letter does not address the applicability of any section of the Code or Regulations
to the facts submitted, other than those sections specifically described. Except as
expressly provided herein, no opinion is expressed or implied concerning the tax
consequences of any aspect of any transaction or item discussed or referenced in this
letter.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) provides that
it may not be used or cited as precedent.

PLR-118744-25
10

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to the Transferring Foundation’s authorized representative.

A copy of this letter must be attached to any income tax return to which it is relevant.
Alternatively, taxpayers filing their returns electronically may satisfy this requirement by
attaching a statement to their return that provides the date and control number of the
letter ruling.

If you have any questions about this ruling, please contact the person whose name and
telephone number are shown in the heading of this letter.

Sincerely,

_______________________________
Seth Groman
Senior Counsel
Exempt Organizations Branch 3
(Employee Benefits, Exempt Organizations,
and Employment Taxes)

cc: ------------------------------
    -------------------------------------------
    ----------------------------------

     ---------------------------------
     -------------------------------------------------------
     -------------------------------
     ----------------------------------