May 18, 2006 | Read Time: 1 minute
TAX WATCH
A donor-advised fund does not deserve tax-exempt status because it improperly shielded donors’ wealth from taxation, the U.S. Court of Federal Claims has ruled.
The court case is among the first involving a donor-advised fund, which allows people to set aside money in a special fund, claim a charitable tax deduction, and then channel the money to charities they choose.
The fund, called the New Dynamics Foundation, sued the government after the Internal Revenue Service denied its application for charity status.
The judge, Francis M. Allegra, said that the donors to the foundation were not channeling the money to legitimate charities, but were instead using it to pay for personal items, such as a rare coin collection and a motor home.
A copy of the decision in New Dynamics Foundation v. the United States (99-197T) is available online at http://www.uscfc.uscourts.gov/Opinions/Allegra/06/ALLEGRA. NewDynamics.pdf.
