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Internal Revenue Code · 26 U.S.C.

§ 4951. Taxes on self-dealing

In force Text current through Public Law 119-121 (October 9, 2026) release point 119-121

Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).

Cite as 26 U.S.C. § 4951

At a glance

Read from the text, the source credit and the official notes. Not part of the law.

Status
In force
Added
February 10, 1978 by Pub. L. 95–227
Last amended
October 24, 1992 by Pub. L. 102–486
Amendments
2 dated changes in the source credit
Length
6 subsections · 1,334 words · about 6 min to read
Defines
6 terms
Cross-references
cites 3; cited by 3 Code sections and 6 other regulations
Regulations
1 issued under this section
(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—
(A) a contributor to the trust,
(B) a trustee of the trust,
(C) an owner of more than 10 percent of—
(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,
which is a contributor to the trust,
(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.
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.
(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.

(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.)

Terms defined here

Where the text says “the term … means”. Select a term to jump to its definition.

Regulations under this section

Treasury regulations (26 CFR) issued under § 4951

Cross-references

Computed from the citations in the text of Title 26 and 26 CFR.

This section cites 3 other sections

Cited by 3 Code sections

Cited in 6 regulations not issued under it

Amendment history

From the source credit and the official notes, newest first.

  1. Amended by Pub. L. 102–486Parts changed in 1992: (f)
  2. Amended by Pub. L. 96–596Parts changed in 1980: (b)(1) (e)(1)(B) (e)(2)(B) (e)(4)
  3. Added by Pub. L. 95–227

Where it sits in the Code

  1. Subtitle D Miscellaneous Excise Taxes
  2. Chapter 42 PRIVATE FOUNDATIONS; AND CERTAIN OTHER TAX-EXEMPT ORGANIZATIONS
  3. Subchapter B Black Lung Benefit Trusts

Nearby sections

Official notes

Show the Law Revision Counsel's notes (amendments, effective dates)

Editorial Notes

Amendments

1992—Subsec. (f). Pub. L. 102–486 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). Pub. L. 96–596, § 2(a)(1)(G), substituted “taxable period” for “correction period”.

Subsec. (e)(1)(B), (C). Pub. L. 96–596, § 2(a)(2)(F), added subpar. (B) and redesignated former subpar. (B) as (C).

Subsec. (e)(2)(B). Pub. L. 96–596, § 2(a)(1)(H), substituted “taxable period” for “correction period”.

Subsec. (e)(4), (5). Pub. L. 96–596, § 2(a)(3)(E), 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 section 6212 of this title 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 section 6213(a) of this title 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 Pub. L. 102–486 applicable to taxable years beginning after Dec. 31, 1991, see section 1940(d) of Pub. L. 102–486, set out as a note under section 192 of this title.

Effective Date of 1980 Amendment

For effective date of amendment by Pub. L. 96–596 with respect to any first tier tax and to any second tier tax, see section 2(d) of Pub. L. 96–596, set out as an Effective Date note under section 4961 of this title.

Effective Date

Subchapter effective with respect to contributions, acts, and expenditures made after Dec. 31, 1977, in and for taxable years beginning after such date, see section 4(f) of Pub. L. 95–227, set out as a note under section 192 of this title.