Out of Control: The Indirect Self-Dealing RulesOut of Control: The Indirect Self-Dealing Rules

Many practitioners and other advisors who have regular dealings with private foundation (PFs) are well aware of the direct self-dealing rules, which severely limit the financial transactions that may occur between a PF and its insiders, technically termed “disqualified persons” (DPs), as defined in Internal Revenue Code Section 4946. Although the direct self-dealing rules are arguably well-defined, the indirect self-dealing rules are fraught with ambiguity. Surprisingly, “indirect self-dealing” isn’t defined by the IRC or the Treasury regulations. Instead, the regulations take the curious approach of providing exceptions¹ to this undefined rule. While many practitioners are aware of the potential for indirect self-dealing in connection w...