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How do we report gifts to and from Donor Advised Funds?

Your Legal Questions Answered

How do we report gifts to and from Donor Advised Funds?

If an individual makes a gift to a Donor Advised Fund, the charitable deduction on their individual tax return Form 1040, Schedule A would be for the gift to the DAF, right? And the charitable organization that receives funds from the DAF would report the DAF on their Form 990 - Schedule B, List of Contributors? Also, for the Form 990, Schedule A calculating public support of the organization that receives the DAF contribution, that contribution is 100% in the numerator and denominator because it is considered to be from a public charity for Schedule A, line 1 of Part II or Part III, and not reduced by the excess over 2% of total support on line 5 of Part II or being from a disqualified person on line 7 of Part III because DAF sponsors are publicly supported? Do I have all this correct?  


Monday, December 28, 2020


I would like to refer you to IRS Notice 2017-73. Below is a summary by E&Y Tax Alert I.D. No. 2017-2182, I have not followed if there were more recent developments on this: The IRS stated that it is aware that some donors and charities seek to use DAF sponsoring organizations as intermediaries to circumvent the 2% public support limitation (i.e., by making contributions to DAFs maintained by sponsoring organizations and then advising the sponsoring organizations to make distributions from the DAFs to the charities). The planned proposed regulations would prevent the use of DAFs to circumvent the private foundation rules and excise taxes. Specifically, the regulations would provide that a donee organization, for purposes of determining its amount of public support, must treat: 1. A sponsoring organization's distribution from a DAF as coming from the donor (or donors) that funded the DAF rather than from the sponsoring organization 2. All anonymous contributions received as being made by one person, and 3. Distributions from a sponsoring organization as public support without limitation only if the sponsoring organization specifies that the distribution is not from a DAF or states that no donor or donor advisor advised the distribution.

I am aware of the IRS Notice on the possibility of trying to trace gifts from Donor Advised Funds back to the donor or advisor if it would adversely affect the public support status of the recipient charity.  There is no indication in the question that the donor advisor is in any way related to the recipient charity, and even if there were a relationship, the contemplated tracing rule is not in effect.  It is good to point out this issue to those who are using a DAF to avoid private foundation status, but I was answering on the basis of current law.  —Don Kramer 

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