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A private foundation that received an

See Regulations section

Line 2. If the foundation is using the

unusually large gift or bequest of

53.4943-6(d) for rules on treatment of

rules or principles for determining

business holdings after 1969, and that

increases in holdings due to

present holdings under section

has made a diligent effort to dispose of

readjustments, distributions, or

4943(c)(4)(or for tax years beginning

excess business holdings, may apply

redemptions.

after August 17, 2006, rules similar to

for an additional 5-year period to

that for donor advised funds and certain

See Regulations section 53.4943-7

reduce its holdings to permissible levels

supporting organizations), refer to that

for special rules for readjustments

if certain conditions are met. See

section and Regulations section

involving grandfathered holdings.

section 4943(c)(7).

53.4943-4(d) to determine which entries

to record in columns (a) and (b). Enter

Exceptions from self-dealing taxes

General rules on the permitted

in column (a) the excess of the

on certain dispositions of excess

holdings of donor advised funds and

substituted combined voting level over

business holdings. Section

certain supporting organizations in a

the disqualified person voting level.

101(I)(2)(B) of the Tax Reform Act of

business enterprise. For tax years

Enter in column (b) the excess of the

1969 provides for a limited exception

beginning after August 17, 2006, rules

substituted combined value level over

from self-dealing taxes for private

similar to those described above for

the disqualified person value level.

foundations that dispose of certain

interests held by private foundations on

excess business holdings to

May 26, 1969, will be applied to

If the foundation is using the rules or

disqualified persons, as long as the

determine if donor advised funds or

principles for determining permitted

sales price equals or is more than fair

certain supporting organizations with

holdings under section 4943(c)(2), refer

market value.

interests as of August 17, 2006, have

to that section to determine which

any excess business holdings.

The excess business holdings

entries to record in column (a). Enter in

However, the date of August 17, 2006,

involved are interests that are subject

column (a) the percentage, using the

will be substituted for May 26, 1969.

to the section 4941 transitional rules for

general rule (section 4943(c)(2)(A)) or

May 26, 1969, holdings. These

Donor advised fund. In general, a

the 35% rule (see section

interests would also be subject to the

donor advised fund is a fund or account

4943(c)(2)(B)), if applicable, of

excess business holdings tax if they

separately identified by reference to

permitted holdings the foundation may

were not reduced by the required

contributions of a donor or donors that

have in the enterprise’s voting stock. If

amount.

is owned and controlled by a

the foundation determines the permitted

sponsoring organization and for which

holdings under section 4943(c)(2)(B),

the donor has or expects to have

Specific Instructions

attach a statement showing effective

advisory privileges concerning the

control by a third party.

Complete columns (a) and (b) of

distribution or investment of the funds.

Schedule C if sections 4943(c)(4),

See Schedule K for further details.

Line 3. Enter the value of any stock,

4943(c)(3) (using the principles of

interest, etc., in the business enterprise

4943(c)(4)), or 4943(c)(5) apply.

Sponsoring organization. A

that the foundation is required to

sponsoring organization is any

Complete column (a) and column (c)

dispose of so the foundation’s holdings

section170(c) organization other than

(if applicable) if sections 4943(c)(2) or

in the enterprise are permitted. See

governmental entities (described in

4943(c)(3) (using the principles of

section 4943 and related regulations.

section 170(c)(1) and (2)(A)) that is not

4943(c)(2)) apply.

a private foundation as defined in

A private foundation using the

section 509(a)(3) that maintains one or

Complete Schedule C for that day

section 4943(c)(4) rules, or a donor

more donor advised funds.

during the tax year when the

advised fund or supporting organization

foundation’s excess holdings in the

using rules similar to that, has excess

Supporting organizations. Only

enterprise were largest.

holdings if line 1 is more than line 2 in

certain supporting organizations are

subject to the excess business holdings

either column (a) or column (b). Do not

Line 1. Enter in column (a) the

tax under section 4943. These include

include in column (b) the value of any

percentage of voting stock the

(1) Type III supporting organizations

voting stock included in column (a).

foundation holds in the business

that are not functionally integrated and

enterprise.

(2) Type II supporting organizations that

A private foundation using the

accept any gift or contribution from a

If the foundation is using the rules or

section 4943(c)(2) rules has excess

person who by himself or in connection

principles for determining present

holdings if line 1 is more than line 2 in

with a related party controls the

holdings under section 4943(c)(4)(A) or

column (a) or if the private foundation

supported organization that the Type II

(D) (or for tax years beginning after

holds nonvoting stock and all

supporting organization supports. (See

August 17, 2006, rules similar to that

disqualified persons together own more

the 2006 Instructions for Schedule A

for donor advised funds and certain

than 20% (or 35%, if applicable) of the

(Form 990 or 990-EZ), Part III, question

supporting organizations), enter in

enterprise’s voting stock, interest, etc.

13, for help in determining the type of

column (b) the percentage of value the

In the latter case, enter in column (c)

your supporting organization.)

foundation holds in all outstanding

the value of all nonvoting stock the

shares of all classes of stock.

foundation holds.

Readjustments, distributions, or

changes in relative value of different

Do not include in either column (a) or

Line 4. Enter the value of excess

classes of stock. See Regulations

(b) stock treated as held by disqualified

holdings disposed of under the 90-day

section 53.4943-4(d)(10) for special

persons:

•

rule in Regulations section

rules whereby increases in the

Under section 4943(c)(6) or

53.4943-2(a)(1)(ii). If other conditions

percentage of value of holdings in a

Regulations sections 53.4943-6 and

preclude imposition of tax on excess

corporation that result solely from

53.4943-10(d), or

•

business holdings, include the value of

changes in the relative values of

During the first phase if the first

the nontaxable amount on this line and

different classes of stock will not result

phase is still in effect (see Regulations

attach an explanation.

in excess business holdings.

sections 53.4943-4(a), (b), and (c)).

-9-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons - Department Of The Treasury - 2006 Page 9

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