A transfer of assets under any liquidation, merger, redemption, recapitalization, or other adjustment, organization, or reorganization to an organization other than a charitable, educational, religious, scientific, etc. organization (excluding an organization engaged in testing for public safety) or a nonexempt charitable trust described in Internal Revenue Code section 4947(a)(l) is a taxable expenditure. For a transfer of assets not to be a taxable expenditure, it must be to one of the organizations described earlier. Unless the transferee is a section 509(a)(1), (2) or (3) organization, section 507(b)(2) applies. However, if the assets are transferred to a transferee organization other than a section 501(c)(3) organization (excluding organizations engaged in testing for public safety) or section 4947(a)(1) organization, and the assets are then transferred to a private foundation to correct a taxable expenditure, section 507(b)(2) applies as if the transfer of assets had been made directly to a private foundation. Return to Life Cycle of a Private Foundation
