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ARTICLE · 28 JUNE 2026

IRS Rules Estate Administration Exception Can Shield Certain Stock Redemptions From Private Foundation Self-Dealing Rules

The IRS has issued guidance on whether transactions involving a family-owned corporation, revocable trusts, and a private foundation constitute prohibited self-dealing under Internal Revenue Code § 4941.

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In Private Letter Ruling 202625012, released June 18, 2026, the IRS addressed the application of the private foundation self-dealing rules under Internal Revenue Code § 4941 to a family-owned corporation, related revocable trusts, and a private foundation that was a potential charitable beneficiary. The ruling involved several related individuals who owned a majority interest in a closely held corporation. 

Each individual had established a revocable trust that would become irrevocable at death. The trusts authorized trustees to direct a portion of trust assets, including corporate stock, to charitable organizations, including a private foundation, through an irrevocable post-death designation. The corporation also held options allowing it to purchase stock from the trusts or estates following the death of a shareholder. The purchase price was required to equal fair market value as determined by an independent appraisal and could be paid in cash, a promissory note, or a combination

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