# § 4951. Taxes on self-dealing
**(a)** **Initial taxes**
**(1)** **On self-dealer** There is hereby imposed a tax on each act of self-dealing between a disqualified person and a trust described in section 501(c)(21). The rate of tax shall be equal to 10 percent of the amount involved with respect to the act of self-dealing for each year (or part thereof) in the taxable period. The tax imposed by this paragraph shall be paid by any disqualified person (other than a trustee acting only as a trustee of the trust) who participates in the act of self-dealing.
**(2)** **On trustee** In any case in which a tax is imposed by paragraph (1), there is hereby imposed on the participation of any trustee of such a trust in an act of self-dealing between a disqualified person and the trust, knowing that it is such an act, a tax equal to 2½ percent of the amount involved with respect to the act of self-dealing for each year (or part thereof) in the taxable period, unless such participation is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any such trustee who participated in the act of self-dealing.
**(b)** **Additional taxes**
**(1)** **On self-dealer** In any case in which an initial tax is imposed by subsection (a)(1) on an act of self-dealing by a disqualified person with a trust described in section 501(c)(21) and in which the act is not corrected within the taxable period, there is hereby imposed a tax equal to 100 percent of the amount involved. The tax imposed by this paragraph shall be paid by any disqualified person (other than a trustee acting only as a trustee of such a trust) who participated in the act of self-dealing.
**(2)** **On trustee** In any case in which an additional tax is imposed by paragraph (1), if a trustee of such a trust refused to agree to part or all of the correction, there is hereby imposed a tax equal to 50 percent of the amount involved. The tax imposed by this paragraph shall be paid by any such trustee who refused to agree to part or all of the correction.
**(c)** **Joint and several liability** If more than one person is liable under any paragraph of subsection (a) or (b) with respect to any one act of self-dealing, all such persons shall be jointly and severally liable under such paragraph with respect to such act.
**(d)** **Self-dealing**
**(1)** **In general** For purposes of this section, the term “self-dealing” means any direct or indirect—
**(A)** sale, exchange, or leasing of real or personal property between a trust described in section 501(c)(21) and a disqualified person;
**(B)** lending of money or other extension of credit between such a trust and a disqualified person;
**(C)** furnishing of goods, services, or facilities between such a trust and a disqualified person;
**(D)** payment of compensation (or payment or reimbursement of expenses) by such a trust to a disqualified person; and
**(E)** transfer to, or use by or for the benefit of, a disqualified person of the income or assets of such a trust.
**(2)** **Special rules** For purposes of paragraph (1)—
**(A)** the transfer of personal property by a disqualified person to such a trust shall be treated as a sale or exchange if the property is subject to a mortgage or similar lien;
**(B)** the furnishing of goods, services, or facilities by a disqualified person to such a trust shall not be an act of self-dealing if the furnishing is without charge and if the goods, services, or facilities so furnished are used exclusively for the purposes specified in section 501(c)(21)(A); and
**(C)** the payment of compensation (and the payment or reimbursement of expenses) by such a trust to a disqualified person for personal services which are reasonable and necessary to carrying out the exempt purpose of the trust shall not be an act of self-dealing if the compensation (or payment or reimbursement) is not excessive.
**(e)** **Definitions** For purposes of this section—
**(1)** **Taxable period** The term “taxable period” means, with respect to any act of self-dealing, the period beginning with the date on which the act of self-dealing occurs and ending on the earliest of—
**(A)** the date of mailing a notice of deficiency with respect to the tax imposed by subsection (a)(1) under section 6212,
**(B)** the date on which the tax imposed by subsection (a)(1) is assessed, or
**(C)** the date on which correction of the act of self-dealing is completed.
**(2)** **Amount involved** The term “amount involved” means, with respect to any act of self-dealing, the greater of the amount of money and the fair market value of the other property given or the amount of money and the fair market value of the other property received; except that in the case of services described in subsection (d)(2)(C), the amount involved shall be only the excess compensation. For purposes of the preceding sentence, the fair market value—
**(A)** in the case of the taxes imposed by subsection (a), shall be determined as of the date on which the act of self-dealing occurs; and
**(B)** in the case of taxes imposed by subsection (b), shall be the highest fair market value during the taxable period.
**(3)** **Correction** The terms “correction” and “correct” mean, with respect to any act of self-dealing, undoing the transaction to the extent possible, but in any case placing the trust in a financial position not worse than that in which it would be if the disqualified person were dealing under the highest fiduciary standards.
**(4)** **Disqualified person** The term “disqualified person” means, with respect to a trust described in section 501(c)(21), a person who is—
For purposes of subparagraphs (C)(i) and (F), there shall be taken into account indirect stockholdings which would be taken into account under section 267(c), except that, for purposes of this paragraph, section 267(c)(4) shall be treated as providing that the members of the family of an individual are only those individuals described in subparagraph (E) of this paragraph. For purposes of subparagraphs (C) (ii) and (iii), (G), and (H), the ownership of profits or beneficial interests shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) (other than paragraph (3) thereof), except that section 267(c)(4) shall be treated as providing that the members of the family of an individual are only those individuals described in subparagraph (E) of this paragraph.
**(A)** a contributor to the trust,
**(B)** a trustee of the trust,
**(C)** an owner of more than 10 percent of—
which is a contributor to the trust,
**(i)** the total combined voting power of a corporation,
**(ii)** the profits interest of a partnership, or
**(iii)** the beneficial interest of a trust or unincorporated enterprise,
**(D)** an officer, director, or employee of a person who is a contributor to the trust,
**(E)** the spouse, ancestor, lineal descendant, or spouse of a lineal descendant of an individual described in subparagraph (A), (B), (C), or (D),
**(F)** a corporation of which persons described in subparagraph (A), (B), (C), (D), or (E) own more than 35 percent of the total combined voting power,
**(G)** a partnership in which persons described in subparagraph (A), (B), (C), (D), or (E), own more than 35 percent of the profits interest, or
**(H)** a trust or estate in which persons described in subparagraph (A), (B), (C), (D), or (E), hold more than 35 percent of the beneficial interest.
**(f)** **Payments of benefits** For purposes of this section, a payment, out of assets or income of a trust described in section 501(c)(21), for the purposes described in subclause (I) or (IV) of section 501(c)(21)(A)(i) shall not be considered an act of self-dealing.
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**Source Credit**: (Added Pub. L. 95–227, § 4(c)(1), Feb. 10, 1978, 92 Stat. 18; amended Pub. L. 96–596, § 2(a)(1)(G), (H), (2)(F), (3)(E), Dec. 24, 1980, 94 Stat. 3469–3471; Pub. L. 102–486, title XIX, § 1940(b), Oct. 24, 1992, 106 Stat. 3035.)
## Editorial Notes
### Amendments
1992—Subsec. (f). substituted “subclause (I) or (IV) of section 501(c)(21)(A)(i)” for “clause (i) of section 501(c)(21)(A)”.
1980—Subsec. (b)(1). , substituted “taxable period” for “correction period”.
Subsec. (e)(1)(B), (C). , added subpar. (B) and redesignated former subpar. (B) as (C).
Subsec. (e)(2)(B). , substituted “taxable period” for “correction period”.
Subsec. (e)(4), (5). , redesignated par. (5) as (4) and struck out former par. (4) which defined correction period, with respect to any act of self-dealing, as the period beginning with the date on which the act of self-dealing occurs and ending 90 days after the date of mailing of a notice of deficiency under with respect to the tax imposed by subsec. (b)(1) of this section, extended by any period in which a deficiency cannot be assessed under and any other period which the Secretary determines is reasonable and necessary to bring about correction of the act of self-dealing.
## Statutory Notes and Related Subsidiaries
### Effective Date of 1992 Amendment
Amendment by applicable to taxable years beginning after , see , set out as a note under .
### Effective Date of 1980 Amendment
For effective date of amendment by with respect to any first tier tax and to any second tier tax, see , set out as an Effective Date note under .
### Effective Date
Subchapter effective with respect to contributions, acts, and expenditures made after , in and for taxable years beginning after such date, see , set out as a note under .