Contents

§ 3.1 MEANING OF GIFTCharitable organizations became concerned about this ruling, as it hadimplications far beyond college and university bowl games. The IRS bowl gameruling raised, once again, the question as to when the extent of donor recognitionrenders a payment not a gift. 152 In the aftermath of this ruling, the IRS promulgatedproposed guidelines, the IRS and Congress held hearings, the IRSissued proposed regulations, and legislation was passed. The law in this regardis discussed elsewhere. 153Thus, a gift or contribution is a payment of money or a transfer of property toa charitable organization when the person making the payment or transfer doesnot receive anything of consequence, of approximate value, in return. As noted,and as discussed elsewhere, 154 a payment may be part gift and part payment fora service or good.(f) Recommendatory RightsA donor may make a gift to a charitable organization but retain the right toadvise—make recommendations—with respect to the gift property, such as oninvestment policy or on ultimate disposition of the gift property and/or theincome generated by the gift property. Normally, the retention of recommendatoryrights does not defeat the transaction from being treated for tax purposes asa gift (in this setting, a deductible charitable gift). The recommendatory right isbest illustrated by the circumstances surrounding a donor-advised fund.Federal law distinguishes between donor-advised funds and donor-directedfunds. The latter type of fund involves an arrangement between a charitableorganization and a donor whereby the donor retains one or more rights as to thesubsequent disposition of the subject of the gift. By contrast, a donor-advisedfund does not have the feature of donor direction, but allows the donor to offeradvice as to the use of the property that is the subject of the gift, such as subsequentdisposition of the property and/or the income from it.There is little specific law on donor-advised funds and donor-directedfunds, however. The closest reference found in the Internal Revenue Code is theprovision for a category of private foundations that can receive contributionssubject to the requirement that the donor and his or her spouse annually designatepublic charities to which the foundation must grant the income and principalof the original contribution; deductible charitable contributions are allowedin these circumstances. 155 This, of course, is a type of private foundation that isclosely comparable to a donor-directed fund. (Nothing in the Internal RevenueCode or tax regulations defines an entity comparable to a donor-advised fund.)A private letter ruling from the IRS is pertinent to this analysis. 156 This rulinginvolved a private foundation, the trustees of which determined to transfer152 In general, it has long been recognized that the mere publicity for a person as a benefactor of a charitable organizationis an incidental benefit that does not adversely impact a charitable deduction. See, e.g., Rev. Rul.67-137, 1967-1 C.B. 63; Priv. Ltr. Rul 9350009.153 See § 23.3.154 See § 22.2.155 IRC § 170(b)(1)(E)(iii). See § 3.4(b), text accompanied by note 439.156 Priv. Ltr. Rul. 8836033. 79