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Advantages of a Donor-Advised Fund Over a Private Foundation


Donor-Advised Fund Private Foundation
Ease of Creation Execution of a simple Deed of Gift: "one day/one document." No set-up fees. Creation of a new organization, application for exempt status and expenditure of time and money. Lengthy IRS approval process.
Tax Benefits^ Taxpayer can deduct up to 50% of adjusted gross income for cash gifts. Full value of gifts of appreciated property is deductible up to 30% of adjusted gross income. Cash gift deduction is limited to 30% of adjusted gross income. Deduction is limited to 20% of adjusted gross income.
Closely-Held Stock, LP & LLC Interests, Real Estate Valued for charitable deduction at market value. Value limited to cost basis.
Accounting and Tax Preparation No separate tax return to file, and no tax to pay. Annual audit and 990 done by the DuPage Foundation. Detailed reporting required and a 2% federal excise tax (1% in some cases) must be paid on net investment income, including gain on assets gifted to the foundation. Separate account statements required.
Grant Administration Staff expertise in identifying potential recipients, reviewing proposals and evaluating performance. Trustees must perform, contract or hire for these services.
Investments No federal investment requirements; no equity concentration restrictions; opportunity to participate in investment pools. Certain types of investments prohibited, and the foundation may not own more than a 20% equity interest in a business.
Distributions No minimum payout required. Approximately 5% of net investment values must be paid out for charitable purposes annually. Prohibition against grants to support lobbying. Restriction on scholarship and research grants.
Confidentiality Names of donors need be revealed only to the IRS. Asset balances, names/addresses of directors and contributors, grants, investments, fees and salaries must be made public through the 990-PF*.
Administration The DuPage Foundation handles phone, mail, and bookkeeping. Trustees must perform, contract or hire for these services.
Size $25,000 minimum, payable over five years. Substantial assets required.

^Consult your tax advisor concerning alternative minimum tax implications and the five-year carry-over rule.

*Private foundations have little confidentiality and no anonymity.  Anyone can access www.guidestar.org to gain information on any private foundation because all of the information is scanned from a foundation's 990-PF.