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that have excess business holdings as

Readjustments, distributions, or

During the first phase if the first

changes in relative value of different

a result of a change in holdings after

phase is still in effect (see Regulations

May 26,1969. This rule applies if the

classes of stock. See Regulations

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

change is other than by purchase by

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

Line 2. If the foundation is using the

the foundation or by disqualified

rules whereby increases in the

rules or principles for determining

persons (such as through gift or

percentage of value of holdings in a

present holdings under section

bequest) and the additional holdings

corporation that result solely from

result in the foundation having excess

changes in the relative values of

4943(c)(4) (or rules similar to that for

business holdings. In that case, the

different classes of stock will not result

donor advised funds and certain

foundation has 5 years to reduce these

in excess business holdings.

supporting organizations), refer to that

holdings or those of its disqualified

section and Regulations section

See Regulations section

persons to permissible levels to avoid

53.4943-4(d) to determine which entries

53.4943-6(d) for rules on treatment of

the tax. See section 4943(c)(6) and

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

increases in holdings due to

Regulations section 53.4943-6.

in column (a) the excess of the

readjustments, distributions, or

substituted combined voting level over

redemptions.

A private foundation that received an

the disqualified person voting level.

unusually large gift or bequest of

See Regulations section 53.4943-7

Enter in column (b) the excess of the

business holdings after 1969, and that

for special rules for readjustments

substituted combined value level over

has made a diligent effort to dispose of

involving grandfathered holdings.

the disqualified person value level.

excess business holdings, may apply

Exceptions from self-dealing taxes

for an additional 5-year period to

on certain dispositions of excess

If the foundation is using the rules or

reduce its holdings to permissible levels

business holdings. Section

principles for determining permitted

if certain conditions are met. See

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

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

section 4943(c)(7).

1969 provides for a limited exception

to that section to determine which

from self-dealing taxes for private

General rules on the permitted

entries to record in column (a). Enter in

foundations that dispose of certain

holdings of donor advised funds and

column (a) the percentage, using the

excess business holdings to

certain supporting organizations in a

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

disqualified persons, as long as the

business enterprise. Rules similar to

the 35% rule (see section

sales price equals or is more than fair

those described above for interests

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

market value.

held by private foundations on May 26,

permitted holdings the foundation may

1969, will be applied to determine if

The excess business holdings

have in the enterprise’s voting stock. If

donor advised funds or certain

involved are interests that are subject

the foundation determines the permitted

supporting organizations with interests

to the section 4941 transitional rules for

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

as of August 17, 2006, have any

May 26, 1969, holdings. These

attach a statement showing effective

excess business holdings. However,

interests would also be subject to the

control by a third party.

the date of August 17, 2006, will be

excess business holdings tax if they

substituted for May 26, 1969.

were not reduced by the required

Line 3. Enter the value of any stock,

amount.

interest, etc., in the business enterprise

Donor advised fund. In general, a

that the foundation is required to

donor advised fund is a fund or account

Specific Instructions

dispose of so the foundation’s holdings

separately identified by reference to

Complete columns (a) and (b) of

in the enterprise are permitted. See

contributions of a donor or donors that

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

section 4943 and related regulations.

is owned and controlled by a

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

sponsoring organization and for which

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

A private foundation using the

the donor has or expects to have

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

Complete column (a) and column (c)

advisory privileges concerning the

advised fund or supporting organization

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

distribution or investment of the funds.

using rules similar to that, has excess

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

See Schedule K for further details.

holdings if line 1 is more than line 2 in

4943(c)(2)) apply.

Sponsoring organization. A

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

Complete Schedule C for that day

sponsoring organization is any

include in column (b) the value of any

during the tax year when the

section170(c) organization other than

voting stock included in column (a).

foundation’s excess holdings in the

governmental entities (described in

enterprise were largest.

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

A private foundation using the

Line 1. Enter in column (a) the

a private foundation as defined in

section 4943(c)(2) rules has excess

percentage of voting stock the

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

holdings if line 1 is more than line 2 in

foundation holds in the business

more donor advised funds.

column (a) or if the private foundation

enterprise.

holds nonvoting stock and all

Supporting organizations. Only

If the foundation is using the rules or

disqualified persons together own more

certain supporting organizations are

principles for determining present

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

subject to the excess business holdings

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

enterprise’s voting stock, interest, etc.

tax under section 4943. These include

(D) (or rules similar to that for donor

In the latter case, enter in column (c)

(1) Type III supporting organizations

advised funds and certain supporting

the value of all nonvoting stock the

that are not functionally integrated and

organizations), enter in column (b) the

foundation holds.

(2) Type II supporting organizations that

percentage of value the foundation

accept any gift or contribution from a

holds in all outstanding shares of all

Line 4. Enter the value of excess

person who by himself or in connection

classes of stock.

holdings disposed of under the 90-day

with a related party controls the

rule in Regulations section

supported organization that the Type II

Do not include in either column (a) or

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

supporting organization supports. (See

(b) stock treated as held by disqualified

preclude imposition of tax on excess

the 2010 Instructions for Schedule A

persons:

•

business holdings, include the value of

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

Under section 4943(c)(6) or

the nontaxable amount on this line and

11, for help in determining the type of

Regulations sections 53.4943-6 and

your supporting organization.)

53.4943-10(d), or

attach an explanation.

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Form 4720 Instructions

Instructions For Form 4720 - Instructions For Return Of Certain Excise Taxes - Department Of The Treasury - 2010 Page 9

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