Code Section 4941(d)(1)(B) treats lending transactions between a private foundation and disqualified person as an act of self-dealing (although an interest-free loan by the disqualified person to the private foundation is not self-dealing) subject to an excise tax. What happens if the private foundation owns an interest in an entity, and that entity holds a promissory note of a disqualified person? Does this avoid self-dealing?
In Rev. Proc. 2021-40, the IRS advises that it will no longer issue private letter rulings regarding the applicability of the self-dealing rules under this fact pattern. Taxpayers should take this as a warning that the IRS may seek to treat such arrangements as self-dealing.
Rev Proc 2021-40, 2021-38 IRB
