Reg. § 1.508-2 Disallowance of certain charitable, etc., deductions.
(a) Gift or bequest to organizations subject to section 507(c) tax
(1) General rule No gift or bequest made to an organization upon which the tax provided by section has been imposed shall be allowed as a deduction under section , , 556(b)(2), , , , or , if such gift or bequest is made:
(i) By any person after notification has been made by the organization under section or after notification has been made by the Commissioner under section , or
(ii) By a substantial contributor (as defined in section ) in his taxable year which includes the first day on which action is taken by such organization which culminates in the imposition of tax under section and any subsequent taxable year
For purposes of subdivision (ii) of this subparagraph, the first day on which action is taken by an organization which culminates in the imposition of tax under section shall be determined under the rules set forth in and .
(2) Exception Subparagraph (1) of this paragraph shall not apply if the entire amount of the unpaid portion of the tax imposed by section is abated by the Commissioner under section .
(b) Gift or bequest to taxable private foundation, section 4947 trust, etc
(1) General rule
(i) Except as provided in subparagraph (2) of this paragraph, no gift or bequest made to an organization shall be allowed as a deduction under section , , 556(b)(2), , , , or , if such gift or bequest is made:
(a) To a private foundation or a trust described in section in a taxable year for which it fails to meet the requirements of section (determined without regard to section (B) and (C), or
(b) To any organization in a period for which it is not treated as an organization described in section by reason of section .
(ii) For purposes of subdivision (i)(a) of this subparagraph the term taxable year refers to the taxable year of the donee or beneficiary organization. In the event a bequest is made to a private foundation or trust described in section which is not in existence at the date of the testator's death (but which is created under the terms of the testator's will), the term taxable year shall mean the first taxable year of the private foundation or trust.
(iii) For purposes of subdivision (i)(a) of this subparagraph, an organization does not fail to meet the requirements of section for a taxable year, unless it fails to meet such requirements for the entire year. Therefore, even if a donee organization fails to meet the requirements of section on the date it receives a grant from a donor, the donor's grant will not be disallowed by operation of section and subdivision (i)(a) of this subparagraph, if the organization meets the requirements of section (determined without regard to section (B) or (C)) by the end of its taxable year.
(iv) No deduction will be disallowed under section with respect to a deduction under section , , 556(b)(2), , , , or if during the taxable year in question, the private foundation or trust described in section has instituted a judicial proceeding which is necessary to reform its governing instrument or other instrument in order to meet the requirements of section . This subdivision shall not apply unless within a reasonable time such judicial proceedings succeed in so reforming such instrument.
(v) No deduction will be disallowed under section and subdivision (i)(a) of this subparagraph for any taxable year beginning before January 1, 1972, with respect to a private foundation or trust described in section organized before January 1, 1970. See also regarding transitional rules for extending compliance with section .
(vi)
(a) In the case of a contribution or bequest to a trust described in section other than to a trust to which subdivision (vii) of this subparagraph applies, no deduction shall be disallowed by reason of section on the grounds that such trust's governing instrument contains no provisions with respect to section . Similarly, if for a taxable year such trust is also a trust described in section , no deduction for such year shall be so disallowed on the grounds that the governing instrument contains no provision with respect to section or .
(b) This subdivision may be illustrated by the following example:
Example. H executes a will on January 1, 1977, establishing a charitable remainder trust (as described in section ) with income payable to W, his wife, for life, remainder to X university, an organization described in section . The will provides that the trust is prohibited from engaging in activities which would subject itself, its foundation manager or a disqualified person to taxes under section 4941 or 4945 of the Code. The will is silent as to sections , , and . H dies February 12, 1978. Section will not operate to disallow any deduction to H's estate under section with respect to such trust.
(vii)
(a) In the case of a trust described in section which by its terms will become a trust described in section and the governing instrument of which is executed after March 22, 1973, the governing instrument shall not meet the requirements of section if it does not contain provisions to the effect that the trust must comply with the provisions of section , or sections , , and (as the case may be) to the extent such section or sections shall become applicable to such trust.
(b) This subdivision may be illustrated by the following example:
Example. H executes a will on January 1, 1977, establishing a charitable remainder trust (as described in section ) with income payable to W, his wife, for life, remainder in trust in perpetuity for the benefit of an organization described in section . By its terms the trust will become a trust described in section , and will become a private foundation. The will provides that the trust is prohibited from engaging in activities which would subject itself, its foundation manager or a disqualified person to taxes under sections 4941 or 4945 of the Code. The will is silent as to sections , , and . H dies February 12, 1978. Unless the trust's governing instrument is amended prior to the end of the trust's first taxable year, or judicial proceedings have been instituted under subdivision (iv) of this subparagraph, section will operate to disallow any deduction to H's estate under section with respect to such trust.
(viii) Since a charitable trust described in section is not required to file a notice under section , section and subdivision (i)(b) of this subparagraph are not applicable to such a trust.
(2) Transitional rules Any deduction which would otherwise be allowable under section , , or shall not be disallowed under section if such deduction is attributable to:
(i) Property passing under the terms of a will executed on or before October 9, 1969,
(a) If the decedent dies after October 9, 1969, but before October 9, 1972, without having amended any dispositive provision of the will after October 9, 1969, by codicil or otherwise,
(b) If the decedent dies after October 9, 1969, and at no time after that date had the right to change the portions of the will which pertains to the passing of property to, or for the use of, an organization described in section or , or
(c) If no dispositive provision of the will is amended by the decedent, by codicil or otherwise, before October 9, 1972, and the decedent is on October 9, 1972, and at all times thereafter under a mental disability (as defined in ) to amend the will by codicil or otherwise, or
(ii) Property transferred in trust on or before October 9, 1969,
(a) If the grantor dies after October 9, 1969, but before October 9, 1972, without having amended, after October 9, 1969, any dispositive provision of the instrument governing the disposition of the property,
(b) If the property transferred was an irrevocable interest to, or for the use of, an organization described in section or ,
(c) In the case of a deduction under section or ; if no dispositive provision of the instrument governing the disposition of the property is amended by the grantor before October 9, 1972, and the grantor is on October 9, 1972, and at all times thereafter under a mental disability (as defined in ) to change the disposition of the property, or
(d) In the case of a deduction under section , if the grantor is at all times after October 9, 1969, and up to, and including, the last day of the taxable year for which the deduction under such section is claimed, under a mental disability (as defined in ) to change the terms of the trust
See also regarding the extension of time for compliance with section , and regarding the special transitional rules for charitable remainder annuity and unitrusts described in section which were created prior to December 31, 1972, and regarding the rules for determining if the dispositive provisions have been amended.
[T.D. 7232, 37 FR 28291, Dec. 22, 1972]