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To minimize the need to apply subjective arm’s-
length standards, to avoid the temptation to misuse
private foundations for noncharitable purposes, to
provide a more rational relationship between sanctions
and improper acts, and to make it more practical to
properly enforce the law, the committee has determined
to generally prohibit self-dealing transactions and to
provide a variety and graduation of sanctions, as
described below.
The committee’s decisions generally in accord with
the House bill, are based on the belief that the
highest fiduciary standards require that self-dealing
not be engaged in, rather than that arm’s-length
standards be observed.
S. Rept. 91-552, 29 (1969), 1969-3 C.B. 443. To the same effect,
see H. Rept. 91-413 (Part 1), 21 (1969), 1969-3 C.B. 214; see
also TRA ‘69 Blue Book 30-31.
As a result, in the Tax Reform Act of 1969, Pub. L. 91-172,
83 Stat. 487 (TRA ‘69), the Congress removed private foundations
from the old arm’s-length self-dealing requirements (sec.
101(j)(7) of TRA ‘69) and enacted section 4941 (sec. 101(b) of
TRA ‘69, relating to taxes on self-dealing). See H. Rept. 91-413
(Part 1), 21 (1969), 1969-3 C.B. 214; S. Rept. 91-552, 29 (1969),
1969-3 C.B. 443; see also TRA ‘69 Blue Book 31.
Section 4941(d)(1) provided the following general definition
of self-dealing:
SEC. 4941. TAXES ON SELF-DEALING.
* * * * * * *
(d) Self-Dealing.--
(1) In general.--For purposes of this section,
the term “self-dealing” means any direct or indirect--
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