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Trump Foundation purchase porrtait found hanging at Doral

First, a quick primer on tax-exempt charities. All 501(c)(3) organizations must be organized and operated exclusively for charitable purposes. Within 501(c)(3), organizations are classified as either public charities or private foundations. Public charities are organizations that are "inherently public" (e.g., non-profit hospitals, schools, churches, etc.) or receive their support from a broad spectrum of the public (e.g., the Red Cross, United Way, etc.). Private foundations typically only receive their support from their founders and families, but sometimes (as is the case with the Trump Foundation) receive support from third parties (but not from a broad enough spectrum to qualify as public charities - it is purely a mathematical test). Because there is less public oversight and more potential for abuse, private foundations are subject to many more rules than public charities.

Key to understanding the private foundation rules is the concept of a "disqualified person." Generally, disqualified persons as to a private foundation are its board members, officers, trustees, and substantial contributors (whether someone is a substantial contributor is also a purely mathematical test). Family members (spouses and up and down a few generations, but not siblings) of disqualified persons are also disqualified persons. Corporations, partnerships, LLCs and other entities of which disqualified persons own (directly or indirectly) more than a 35% interest are also disqualified persons.

Generally, a private foundation is prohibited from entering into (almost) ANY transaction with a disqualified person. Some specific acts of self-dealing are the sale, exchange, or leasing of property, lending money or other extensions of credit, providing goods, services, or facilities, transferring foundation income or assets to, or for the use or benefit of, a disqualified person. The private foundation rules are very over broad and some transactions that benefit the private foundation significantly are even prohibited. For example, a disqualified person can't lease property owned by a private foundation, even if the fair rental value of the property is say $500/month and the disqualified person is willing to pay $5,000/month. There are a number of exceptions, most in the context of the disqualified person providing something for free to the private foundation or the private foundation providing the same goods, services or facilities to a disqualified person on the same terms and conditions that it does to the general public.

Getting specifically into the Trump situation and some of ITC's questions, a private foundation can spend money on artwork for its office or as an investment. If a foundation purchases a Monet, it can hang in the foundation's office. It could not lend the Monet to a gallery without compensation if the gallery is not also a charity (i.e., a non-profit museum), regardless of who owns the gallery. This goes to the general rule that charities must be operated exclusively for charitable purposes. If the gallery is a disqualified person (i.e., it is owned by a disqualified person) this is also a violation of the private foundation self-dealing rules. If the foundation is compensated for lending the Monet to the gallery, this would be permissible if the gallery is not a disqualified person. If the gallery is a disqualified person, then even if it is paying above fair market rent, it is still a violation of the self-dealing rules.

The act of purchasing the portrait of the Donald by the Trump Foundation was not a problem (likewise, neither is the Tim Tebow helmet purchase). What was done with the portrait after the purchase is the problem (and so far, I don't think anyone has proof of what happened to the helmet). I'm sure that Doral is at least 35% owned, directly or indirectly by Trump or other disqualified persons. If that is the case, there is no doubt that this is transferring foundation assets for the use of a disqualified person. If Doral isn't 35% owned by Trump or other disqualified persons, it may not technically be a violation of the self-dealing rules, but it is a violation of the prohibition against private benefit and private inurement.

To my knowledge, willful violations of the self-dealing rules are not sufficient to lead to any criminal charges. There are excise taxes on the disqualified person and the foundation (regardless of whether the violations are willful and/or repeated) and the IRS can revoke the tax-exempt status of the organization after willful and/or repeated violations.

Wow, I am such a super nerd.
 
Cav, I have an estate I'm working on where we've asked your boss a number of questions on return positions - if it hits the fan (and I think it will), we may be working together.
 
Wakelaw2006 said:
First, a quick primer on tax-exempt charities. All 501(c)(3) organizations must be organized and operated exclusively for charitable purposes. Within 501(c)(3), organizations are classified as either public charities or private foundations. Public charities are organizations that are "inherently public" (e.g., non-profit hospitals, schools, churches, etc.) or receive their support from a broad spectrum of the public (e.g., the Red Cross, United Way, etc.). Private foundations typically only receive their support from their founders and families, but sometimes (as is the case with the Trump Foundation) receive support from third parties (but not from a broad enough spectrum to qualify as public charities - it is purely a mathematical test). Because there is less public oversight and more potential for abuse, private foundations are subject to many more rules than public charities.

Key to understanding the private foundation rules is the concept of a "disqualified person." Generally, disqualified persons as to a private foundation are its board members, officers, trustees, and substantial contributors (whether someone is a substantial contributor is also a purely mathematical test). Family members (spouses and up and down a few generations, but not siblings) of disqualified persons are also disqualified persons. Corporations, partnerships, LLCs and other entities of which disqualified persons own (directly or indirectly) more than a 35% interest are also disqualified persons.

Generally, a private foundation is prohibited from entering into (almost) ANY transaction with a disqualified person. Some specific acts of self-dealing are the sale, exchange, or leasing of property, lending money or other extensions of credit, providing goods, services, or facilities, transferring foundation income or assets to, or for the use or benefit of, a disqualified person. The private foundation rules are very over broad and some transactions that benefit the private foundation significantly are even prohibited. For example, a disqualified person can't lease property owned by a private foundation, even if the fair rental value of the property is say $500/month and the disqualified person is willing to pay $5,000/month. There are a number of exceptions, most in the context of the disqualified person providing something for free to the private foundation or the private foundation providing the same goods, services or facilities to a disqualified person on the same terms and conditions that it does to the general public.

Getting specifically into the Trump situation and some of ITC's questions, a private foundation can spend money on artwork for its office or as an investment. If a foundation purchases a Monet, it can hang in the foundation's office. It could not lend the Monet to a gallery without compensation if the gallery is not also a charity (i.e., a non-profit museum), regardless of who owns the gallery. This goes to the general rule that charities must be operated exclusively for charitable purposes. If the gallery is a disqualified person (i.e., it is owned by a disqualified person) this is also a violation of the private foundation self-dealing rules. If the foundation is compensated for lending the Monet to the gallery, this would be permissible if the gallery is not a disqualified person. If the gallery is a disqualified person, then even if it is paying above fair market rent, it is still a violation of the self-dealing rules.

The act of purchasing the portrait of the Donald by the Trump Foundation was not a problem (likewise, neither is the Tim Tebow helmet purchase). What was done with the portrait after the purchase is the problem (and so far, I don't think anyone has proof of what happened to the helmet). I'm sure that Doral is at least 35% owned, directly or indirectly by Trump or other disqualified persons. If that is the case, there is no doubt that this is transferring foundation assets for the use of a disqualified person. If Doral isn't 35% owned by Trump or other disqualified persons, it may not technically be a violation of the self-dealing rules, but it is a violation of the prohibition against private benefit and private inurement.

To my knowledge, willful violations of the self-dealing rules are not sufficient to lead to any criminal charges. There are excise taxes on the disqualified person and the foundation (regardless of whether the violations are willful and/or repeated) and the IRS can revoke the tax-exempt status of the organization after willful and/or repeated violations.

Wow, I am such a super nerd.
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Given that much of the self worth Trump reports is based on valuation of the Trump golf properties, I'd bet he is absolutely more than 35% owner of Trump Doral.
 
How about paying the settlement that was made with Doral not the Trump Foundation?

What about paying the fin for the Mar-A-Lago flag?
 
RJKarl said:
How about paying the settlement that was made with Doral not the Trump Foundation?

What about paying the fin for the Mar-A-Lago flag?
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The clearest violations of the self-dealing rules I can think of.
 
I suppose if I toiled in the tax code for 60 hours a week I'd think this was a big deal too.

I hope they throw the book at Trump.
 
aocs3281 said:
I suppose if I toiled in the tax code for 60 hours a week I'd think this was a big deal too.

I hope they throw the book at Trump.
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How about the hundreds of people he has stolen money and services from?

How about the $1,000,000 fine for illegal hiring practices for Trump Tower?

My bad, nothing he does is bad for aocs.
 
RJKarl said:
Would they be shut down by the IRS or NY State?

Could they forced to return all funds they have taken in?
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The IRS can assess excise taxes and revoke the Foundation's tax exemption. I don't know NY law, but generally, the state attorney general is charged with the responsibility of representing the interests of charities. How far that authority extends in NY, I have no idea.
 
Everyone acting like trump some rogue tax cheat

Everything was blessed by lawyers and accountants or will be defended

Irs ain't taking on trump
 
I don't think anything significant will happen, but if you think Trump's lawyers and accountants blessed that..........
 
Frankly I didn't read the story but I'm talking about the alleged bigguns

This sounds like chicken shit
 
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