Navigating Self-Dealing Pitfalls in Private Foundations and Family OfficesNavigating Self-Dealing Pitfalls in Private Foundations and Family Offices

The intersection of family offices and private foundations (PFs) presents opportunities and pitfalls¹ for wealthy families committed to pursuing their philanthropic endeavors effectively. With increasing numbers of wealthy families managing PFs in conjunction with their family offices, understanding the many ways that family offices and PFs can transact with each other is crucial to maintaining a PF’s tax-exempt status and avoiding costly penalties.  

The self-dealing rules of Internal Revenue Code Section 4941 were introduced with the Tax Reform Act of 1969, primarily to prevent PFs from being exploited for personal benefit.² These rules were designed to ensure that transactions between PFs and their closely associated individuals or ent...