Can our foundation, run from the founder’s family office, pay the family office for space and services?

Private foundations cannot engage in the purchase, sale, lease, or exchange of property with a disqualified person—in this case, the founder’s family office—even at below-market rates. The family office may provide space to the foundation at no cost.

In addition, private foundations cannot compensate a disqualified person, except for personal services as defined by the IRS. Payments for personal services should be necessary and reasonable, covering only those services that directly benefit the foundation. For example, services such as accounting and tax preparation are personal services and can be paid to the family office. Compensating the family office for other services (e.g., maintenance) would be self-dealing. The foundation may pay its portion of maintenance costs directly to the maintenance company.

The self-dealing rules can be complicated, even counterintuitive. See our publication How to Avoid Self-Dealing for more details.

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