Exactly how does a foundation work? Is all this money truly their money they are donating or do people donate to the foundation so they’re actually donating a lot of people’s money?
Usually the way the foundation works is that a rich person gives a generous amount in seed money, which is then invested to produce an income for the foundation. After that, they can continue to make donations to the foundation, but a board of directors (on which the original donor may sit) determines how the money is allocated and invested. Forming the foundation creates a tax shelter for the original donor, though some of the control may be taken out of his hands. If he chairs the foundation, it may pay for his automobiles, house, entertainment expenses, etc., though this must be done with great care to avoid drawing the gaze of the IRS. This is how dead folks like Paul Newman can continue to give.
Somebody like Rush who just writes a check to a good cause may get a tax writeoff, depending on where the check is going, but it’s a less powerful tax shelter than a foundation.
Baically there are two types of foundations....private and community.
I set up a foundation under its own entity designed for my family to distribute chartible givings. In that vein I am the sole contributor to that foundation and may have my spouse, children as directors of the board.
It is classified under 503c and as a non profit orgaizatin it may exclude income tax, and as a charitble foundation it also may exclude property tax and sales tax.
as a private foundation the source is singular in nature in that is funded from and individual or corporation. The gransts are made to individuals or organized chariites, the private does not operae charities on its own.
To simply answer you question the private foundation DOES NOT donate other peoples money, it is the money from their soul source. Administart fees governed by 503 can be drawn and at least 5% of the foundation must be distibuted each year. yea