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You are the Executive Director of the New York Institute for Contemporary Arts (the \"Institute\"), a nonprofit corporation that was formed in 2018 and recognized by the IRS as a taxeexempt public charity in 2019. The Institute's exempt purpose is to increase the public's awareness of and stimulate its interest in all forms of contemporary visual and performing arts. Its principal activity in furtherance of those purposes is conducting training and classes in contemporary visual and performing arts for artistically gifted children and young adults. The Institute is located in the Bushwick section of Brooklyn, a place known for its modern art scene and as an incubator for emerging talent. Its facilities are housed in an historic warehouse that spans an entire block. In connection with the execution ofa 20year lease, the Institute's building underwent a substantial renovation to create a stateeofetheeart 75075eat theater and a smaller lecture hall that seats up to 200 patrons, two art galleries, a dance studio, eight \"loft\" style artist studios, five rehearsal studios, a ceramics studio, a digital arts lab, and six classrooms. Both the theater and lecture hall offer live recording and broadcast capabilities. The Institute's founder, Gary Jones, is an investment banker who retired from a successful 307year career at a global financial institution to dedicate his life to the arts. Mr. Jones served as Executive Director of the Institute from inception until you took the helm in September 2021, and Mr. Jones now serves as Chairman of the Institute's Board of Directors. The Institute's other Board members are: - Carolyn Abrams, an artist, curator, and editor who was a cofounder of the Material Group, a Tribeca artists' collaborative that has produced more than fifty exhibitions and public projects exploring relationships between politics and aesthetics. - Collin Brown, a GRAMMY Award-winning jazz recording producer and audio engineer; - Mr. Jones' son, Jon, a CPA and former business manager at Starstruck Entertainment, the top artists' management firm in Nashville, which represents several country music stars; - Ed Jewell, a professional money manager and arts aficionado; - Jackie Liu, an awardwinning architect and partner in the design firm that handled the Institute's renovation; - Elise Dugan, Director of Philanthropic Partnerships at Princeton University; and - Joe Griffin, Director of Operations at the National Beverage Association. For the past three years, the Institute has generated half its operating revenue from tuition paid by students enrolled in its instructional programs. The other half has been covered equally by multiyear startup grants from a private foundation and The National Endowment for the Arts (N EA}, the agency established by Congress to provide support and funding for the arts. Both grants expire December 31, 2022. The foundation has confirmed that it will not renew its grant. The NEA seems inclined to renew, but has not confirmed this, or its level of funding. Faced with the potential loss of at least 25% of the Institute's funding, the Board starts to brainstorm at its June 2022 meeting about new ways to generate revenue for the organization. Question 1 Mr. Jewell owns a forsprofit museum that displays contemporary art. Currently, the entire collection displayed in the museum is owned by Mr. Jewell. He proposes donating his collection to the Institute (claiming a charitable tax deduction) and then leasing the collection back from the Institute to be displayed at his museum. 1. Could this transaction jeopardize the lnstitute's tax-exempt status? Why or why not? if you believe the transaction could jeopardize the lnstitute's tax-exempt status, please discuss whether there are ways to structure the transaction that would minimize or eliminate this risk. . Could this transaction result in federal tax penalties? Why or why not? if you believe that the transaction could give rise to tax penalties, please identir the person(s) potentially liable for these penalties and whether there are ways to structure or engage in the transaction to minimize or eliminate the risk of tax penalties. Iv