Instructions For Form 990-Pf - Return Of Private Foundation Or Section 4947(A)(1) Nonexempt Charitable Trust Treated As A Private Foundation - 2001 Page 11
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30(as defined in Regulations section
income earned from the function that is
Special rule. The expenses attributable
1.863-7), and other substantially similar
includible as gross investment income for
to each specific charitable activity, limited
income from ordinary and routine
the year.
by the amount of income from the activity,
investments excluded by section
must be reported in column (c) on lines
For example, if rental income is
512(b)(1). Therefore, interest received on
13 – 26. If the expenses of any charitable
incidentally realized in 2001 from historic
a student loan is includible in the gross
activity exceed the income generated by
buildings held open to the public,
investment income of a private foundation
that activity, only the excess of these
deductions for amounts paid or incurred
making the loan.
expenses over the income should be
in 2001 for the production of this income
reported in column (d).
Net investment income is the
may not be more than the amount of
amount by which the sum of gross
rental income includible as gross
Examples.
investment income and the capital gain
investment income in column (b) for 2001.
1. A charitable activity generated
net income exceeds the allowable
Expenses related to tax-exempt
$5,000 of income and $4,000 of
deductions discussed later. Tax-exempt
interest. Do not include on lines 13 – 23
expenses. Report all of the income and
interest on governmental obligations and
of column (b) any expenses paid or
expenses in column (c) and none in
related expenses are excluded.
incurred that are allocable to tax-exempt
column (d).
Investment income. Include in column
interest that is excluded from lines 3
2. A charitable activity generated
and 4.
$5,000 of income and $6,000 of
(b) all or part of any amount from column
(a) that applies to investment income.
expenses. Report $5,000 of income and
Column (c) —Adjusted Net Income
$5,000 of expenses in column (c) and the
However, do not include in column (b)
Nonoperating private foundations
excess expenses of $1,000 in column (d).
any interest, dividends, rents or royalties
(and related expenses) that were reported
TIP
should see item 1 under
Nonoperating private foundations. The
Nonoperating private
on Form 990-T.
following rules apply to nonoperating
foundations on this page to find out if
For example, investment income from
private foundations.
they need to complete column (c).
debt-financed property unrelated to the
1. If a nonoperating private foundation
Private operating foundations. All
organization’s charitable purpose and
has no income from charitable activities
organizations that claim status as private
certain rents (and related expenses)
that would be reportable on line 10 or line
operating foundations under section
treated as unrelated trade or business
11 of Part I, it does not have to make any
4942(j)(3) or (5) must complete all lines of
income should be reported on Form
entries in column (c).
column (c) that apply, according to the
990-T. Income from debt-financed
2. If a nonoperating private foundation
general rules for income and expenses
property that is not taxed under section
has income from charitable activities, it
that apply to this column, the specific line
511 is taxed under section 4940. Thus, if
must report that income only on lines 10
instructions for lines 3 – 27c, the Special
the debt/basis percentage of a
and/or 11 in column (c). These
rule, and Examples 1 and 2 below.
debt-financed property is 80%, only 80%
foundations do not need to report other
of the gross income (and expenses) for
General rules. In general, adjusted net
kinds of income and expenses (such as
that property is used to figure the section
income is the amount of a private
investment income and expenses) in
511 tax on Form 990-T. The remaining
foundation’s gross income that is more
column (c).
20% of the gross income (and expenses)
than the expenses of earning the income.
3. If a nonoperating private foundation
of that property is used to figure the
The modifications and exclusions
has income that it reports on lines 10 and/
section 4940 tax on net investment
explained below are applied to gross
or 11, report any expenses relating to this
income on Form 990-PF. (See Form
income and expenses in figuring adjusted
income following the general rules and
990-T and its instructions for more
net income.
the special rule. See Examples 1 and 2
information.)
For income and expenses, include on
above.
Investment expenses. Include in
each line of column (c) only that portion of
column (b) all ordinary and necessary
the amount from column (a) that is
Column (d)—Disbursements for
expenses paid or incurred to produce or
applicable to the adjusted net income
Charitable Purposes
collect investment income from: interest,
computation.
Expenses entered in column (d) relate to
dividends, rents, amounts received from
Income. For column (c), include
activities that constitute the charitable
payments on securities loans (as defined
income from charitable functions,
purpose of the foundation.
in section 512(a)(5)), royalties, income
investment activities, short-term capital
from notional principal contracts, and
For amounts entered in column (d):
gains from investments, amounts set
•
other substantially similar income from
Use the cash receipts and
aside, and unrelated trade or business
ordinary and routine investments
disbursements method of accounting no
activities. Do not include gifts, grants, or
excluded by section 512(b)(1); or for the
matter what accounting method is used in
contributions, or long-term capital gains or
management, conservation, or
keeping the books of the foundation.
losses.
•
maintenance of property held for the
Do not include any amount or part of
Expenses. Deductible expenses
production of income that is taxable under
an amount that is included in column (b)
include the part of a private foundation’s
section 4940.
or (c).
operating expenses that is paid or
•
Include on lines 13 – 25 all expenses,
If any of the expenses listed in column
incurred to produce or collect gross
including necessary and reasonable
(a) are paid or incurred for both
income reported on lines 3 – 11 of column
administrative expenses, paid by the
investment and charitable purposes, they
(c). If only part of the property produces
foundation for religious, charitable,
must be allocated on a reasonable basis
income includible in column (c),
scientific, literary, educational, or other
between the investment activities and the
deductions such as interest, taxes, and
public purposes, or for the prevention of
charitable activities so that only expenses
rent must be divided between the
cruelty to children or animals.
from investment activities appear in
charitable and noncharitable uses of the
•
Include a distribution of property at the
column (b). Examples of allocation
property. If the deductions for property
fair market value on the date the
methods are given in the instructions for
used for a charitable, educational, or
distribution was made.
Part IX-A.
other similar purpose are more than the
•
Include only the part entered in column
Limitation. The deduction for
income from the property, the excess will
(a) that is allocable to the charitable
expenses paid or incurred in any tax year
not be allowed as a deduction but may be
purposes of the foundation.
for producing gross investment income
treated as a qualifying distribution in Part
earned incident to a charitable function
I, column (d). See Examples 1 and 2
Example. An educational seminar
cannot be more than the amount of
below.
produced $1,000 in income that was
-11-
Form 990-PF Instructions
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