Otis is the CEO of Rectify, Inc., a private foundation. Otis invests $500,000 (80%) of the foundation’s investment portfolio in derivatives.

Otis is the CEO of Rectify, Inc., a private foundation. Otis invests $500,000 (80%) of the foundation’s investment portfolio in derivatives. Previously, the $500,000 had been invested in corporate bonds with an AA rating that earned 7A% per annum. If the derivatives investment works as Otis’s investment adviser claims, the annual earnings could be as high as 20%.Determine if Rectify is subject to any of the taxes imposed on private foundations.

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