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Donor Advised Funds IRC §4966

John Dundon

In my last post about how year end tax planning starts with reassessing one’s commitment to charitable donations, I mentioned that my mom donated her appreciated shares of Exon Mobile to a Donor Advised Fund (DAF). Many readers had questions about what a DAF is and the mechanics of donating to one. So much so I was compelled to follow up in this post.

A DAF, often referred to as charitable gift fund or philanthropic fund, generally allows for a charitable contribution without making a final decision regarding how funds will be used at the time of the donation.

Statutorily, a “donor advised fund” (DAF) means a fund or account that is owned and controlled by a sponsoring organization and separately identified by reference to contributions of a donor. The donor has advisory privileges with respect to the distribution or investment of amounts held in such fund or account as per IRC §4966(d)(2)(A).

A Sponsoring Organizations owning a DAF’s should be aware of the following charitable giving tax issues:

  • It is described in section 170(c).
  • It is NOT a private foundation described in section 509(a).
  • It accepts & acknowledges donations which are immediately tax-deductible to the donor.

DAF’s are useful because they tend to gap a timing difference allowing a donor to potentially be more generous now with funds used for charitable purposes in future years.

DAF’s Appeal To Donors:

  • with a high income year, but distributed charitable intent.
  • who plan to fund many small charitable gifts with proceeds from securities.
  • whose planned contributions are insufficient to justify the costs of a private foundation.
  • who wish to be relieved of the administration of a private foundation.
  • wishing to advise the fund regarding distributions.


1. the sponsoring organization ultimately controls investment and distribution decisions.

2. if the sponsor of the DAF doesn’t have control over the funds the donation might not qualify for a charitable contribution.


I am enrolled with the United States Treasury Department to practice before the IRS, governed by rules stipulated in United States Treasury Circular 230. As a Federally Authorized Tax Practitioner and a tax appeals specialist my Enrolled Agent License #85353 is issued by the United States Treasury. With this license I work for U.S. taxpayers everywhere to resolve tax matters and de-escalate stress about taxes or tax disputes for individuals and corporations with federal and state issues.

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