Any distribution by a corporation that is a disqualified person in redemption of stock held by a private foundation in a business enterprise will be treated as not essentially equivalent to a dividend if all the following conditions are met: The stock was owned by the private foundation on May 26,1969, The foundation is required to dispose of the stock in order not to be liable for the tax on excess business holdings, and The foundation receives in return an amount that equals or exceeds the fair market value of the stock at the time of disposition (or at the time a contract for the disposition was previously executed) in a transaction that would not be a prohibited transaction (under section 503(b) of the Code). For purposes of (1) above, if a private foundation acquired stock under the terms of a trust that was irrevocable on May 26, 1969, or under the terms of a will executed by that date, which is in effect on that date and at all times thereafter, the foundation will be considered as owning the stock on that date. Return to Life Cycle of a Private Foundation
