Contents

§ 3.1 MEANING OF GIFTcourt held that the organization was a publicly supported charitable organizationthat “exercises full control over the donated funds and exercises independentdiscretion as to the charitable disbursement of the funds.” 165The IRS is studying the matter of donor-directed funds, both as to their publiccharity/private foundation status 166 and the treatment of transfers to them asgifts. 167 This study is embracing donor-advised funds, notwithstanding an IRSprivate letter ruling to the contrary. 168 The withdrawal of the revenue ruling concerningmaintenance of pooled income funds by community foundations isanother manifestation of the difficulties the IRS is having in this area. 169The extent to which a donor can maintain any input over the use and ultimatedisposition of a gift to a charitable organization is directly addressed by theInternal Revenue Code and the tax regulations in analogous areas. As discussed,however, the IRS has indicated that the specific rules to follow are those enumeratedin the context of private foundation status termination. 170One of these bodies of law pertains to publicly supported community trusts.Although the tax regulations are generally silent on the matter of donor-directedfunds and donor-advised funds, in the sense of use of that phraseology, 171 theregulations pertaining to qualified publicly supported community trusts directlyrelate to this matter of recommendatory rights. The regulations speak of thesetrusts as organizations that often receive contributions that are “maintained inthe form of separate trusts or funds, which are subject to varying degrees of controlby the governing body” of the trust. 172 When certain criteria are satisfied, thecommunity trust will be treated as a “single entity, rather than as an aggregate ofseparate funds.” 173 One of these criteria is that the transferred assets may not besubjected to “any material restriction or condition.” 174 That phrase is defined bythe private foundation rules, as discussed above. 175 These regulations state thatgifts made to a fund that is a component part of a qualified community trust areconsidered to be gifts made to the trust for purposes of computing public support;the implication is unmistakable that these gifts are also deductible by thedonors, notwithstanding the structure of the recipient charity or the recommendatoryrights the donors may have.Another of these bodies of law involves the grantor trust rules. 176 Theserules also are used to evaluate whether a grantor (donor) has retained rightswith respect to the transferred property that would cause the transaction to besomething other than an outright gift. These rules look to determine whether thegrantor has, despite the transaction, retained significant ownership interests.165 Id.166 See § 3.4.167 Gen. Couns. Mem. 39875, which withdrew Gen. Couns. Mem. 39748.168 Priv. Ltr. Rul. 9250041.169 Rev. Rul. 93-8, 1993-1 C.B. 125, revoking Rev. Rul. 92-108, 1992-2 C.B. 121. See § 13.9(b).170 See text accompanied by notes 158–159.171 The exception to this observation being the regulations accompanying IRC § 170(b)(1)(E)(iii); see note 155.172 Reg. § 1.170A-9(e)(10).173 Reg. § 1.170A-9(e)(11)(i).174 Reg. § 1.170A-9(e)(11)(ii)(B).175 See text accompanied by note 158.176 See § 3.7. 81