The Most Difficult Sentence To Understand In The Tax Code

The Most Difficult Sentence To Understand In The Tax Code

Today I am going to share with my readers, Internal Revenue Code Section 509(a), which is supposed to be “legendary as the most difficult sentence to understand in the tax code.”

Here is what Section 509(a) has to say:

§ 509 Private foundation defined.

(a) General rule.
For purposes of this title, the term “private foundation” means a domestic or foreign organization described in section 501(c)(3) other than—

(1) an organization described in section 170(b)(1)(A) (other than in clauses (vii) and (viii) );

(2) an organization which—

(A) normally receives more than one-third of its support in each taxable year from any combination of—

(i) gifts, grants, contributions, or membership fees, and

(ii) gross receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in an activity which is not an unrelated trade or business (within the meaning of section 513 ), not including such receipts from any person, or from any bureau or similar agency of a governmental unit (as described in section 170(c)(1) ), in any taxable year to the extent such receipts exceed the greater of $5,000 or 1 percent of the organization’s support in such taxable year, from persons other than disqualified persons (as defined in section 4946 ) with respect to the organization, from governmental units described in section 170(c)(1) , or from organizations described in section 170(b)(1)(A) (other than in clauses (vii) and (viii) ), and

(B) normally receives not more than one-third of its support in each taxable year from the sum of—

(i) gross investment income (as defined in subsection (e) ) and

(ii) the excess (if any) of the amount of the unrelated business taxable income (as defined in section 512 ) over the amount of the tax imposed by section 511 ;

(3) an organization which—

(A) is organized, and at all times thereafter is operated, exclusively for the benefit of, to perform the functions of, or to carry out the purposes of one or more specified organizations described in paragraph (1) or (2) ,

(B) is—

(i) operated, supervised, or controlled by one or more organizations described in paragraph (1) or (2) ,

(ii) supervised or controlled in connection with one or more such organizations, or

(iii) operated in connection with one or more such organizations, and

(C) is not controlled directly or indirectly by one or more disqualified persons (as defined in section 4946 ) other than foundation managers and other than one or more organizations described in paragraph (1) or (2) ; and

(4) an organization which is organized and operated exclusively for testing for public safety.

What an incredible sentence! I wish I had written that!

Let me know if you have a favorite sentence from the Internal Revenue Code.

– Mark S Gleason
– www.lakes-cpa.com

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Mark Gleason

7200 France Avenue South
Suite 328
Edina, MN 55435

Tel: 612-861-4542
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mark@lakes-cpa.com

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