Audit: Defense of a Private Foundation
Our client is the manager and a so-called “disqualified person” as defined under the Internal Revenue Code of a multimillion dollar charitable foundation. Section 4958 of the Internal Revenue Code imposes a tax on each excess benefit transaction. An excess benefit transaction is a transaction between an applicable tax exempt organization and a disqualified person who received an ill-gained benefit. The disqualified person is liable for an initial tax of 20 percent and an additional tax of 200 percent if the excess benefit transaction is not corrected with the taxable period. The IRS audited the foundation our client was managing. The IRS claimed that our client was a disqualified person liable for an additional 200 percent tax of approximately 1.5 million due to an incorrectly received benefit. The IRS also attempted to revoke the tax exempt status of the foundation which would have resulted in a massive excise tax liability to our client. Our attorneys convinced the IRS not to impose $1.5 million dollar tax against our client.
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