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INTERNAL REVENUE CODE OF 1954
of his family (as defined in section 267(c)(4)) was a party to such prohibited transaction. (f) DEFINITION.—For purposes of this section, the term "gift or bequest" means any gift, contribution, bequest, devise, legacy, or transfer. (g) SPECIAL RULE FOR LOANS.—For purposes of the application of subsection (c)(1), in the case of a loan by a trust described in section 401 (a), the following rules shall apply with respect to a loan made before March 1, 1954, which would constitute a prohibited transaction if made on or after March 1, 1954: (1) If any part of the loan is repayable prior to December 31, 1955, the renewal of such part of the loan for a period not extending beyond December 31, 1955, on the same terms, shall not be considered a prohibited transaction. (2) If the loan is repayable on demand, the continuation of the loan without the receipt of adequate security and a reasonable rate of interest beyond December 31, 1955, shall be considered a prohibited transaction. SEC. 504. DENIAL OF EXEMPTION. (a) GENERAL RULE. — I n the case of any organization described in section 501(c)(3) to which section 503 is applicable, exemption under section 501 shall be denied for the taxable year if the amounts accumulated out of income during the taxable year or any prior taxable year and not actually paid out by the end of the taxable year— (1) are unreasonable in amount or duration in order to carry out the charitable, educational, or other purpose or function constituting the basis for exemption under section 501(a) of an organization described in section 501(c)(3); or (2) are used to a substantial degree for purposes or functions other than those constituting the basis for exemption under section 501(a) of an organization described in section 501(c)(3); or (3) are invested in such a manner as to jeopardize the carrying out of the charitable, educational, or other purpose or function constituting the basis for exemption under section 501(a) of an organization described in section 501(c)(3). Paragraph (1) shall not apply to income attributable to property of a decedent dying before January 1, 1951, which is transferred under his will to a trust created by such will. In the case of a trust created by the will of a decedent dying on or after January 1, 1951, if income is required to be accumulated pursuant to the mandatory terms of the will creating the trust, paragraph (1) shall apply only to income accumulated during a taxable year of the trust beginning more than 21 years after the date of death of the last life in being designated in the trust instrument. (b)
CROSS R E F E R E N C E S. —
For limitation on charitable contributions ^ case of unreasonable accumulations by certain trusts, see section 681(c)(2).
§ 503(e)
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