Instructions For Form 990-Pf - Return Of Private Foundation Or Section 4947(A)(1) Nonexempt Charitable Trust Treated As A Private Foundation - 2001 Page 22
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30are not required to be listed separately
rather than used or held for use directly
Any reduction in value allowed under
but may be grouped with other
by the foundation for charitable purposes.
these provisions may not be more than
program-related investments of the same
10% of the fair market value (determined
For example, an office building that is
type. Loans to other section 501(c)(3)
without regard to any reduction in value).
used to provide offices for employees
organizations and all other types of
Also, see Regulations sections
engaged in managing endowment funds
program-related investments must be
53.4942(a)-2(c)(4)(i)(b), (c), and (iv)(a).
for the foundation is not considered an
listed separately on lines 1 through 3 or
asset used for charitable purposes.
Line 1b — Average of monthly cash
on an attachment.
balances. Compute cash balances on a
Dual-use property. When property is
Lines 1 and 2. List the two largest
monthly basis by averaging the amount of
used both for charitable and other
program-related investments made by the
cash on hand on the first and last days of
purposes, the property is considered used
foundation in 2001, whether or not the
each month. Include all cash balances
entirely for charitable purposes if 95% or
investments were still held by the
and amounts that may be used for
more of its total use is for that purpose. If
foundation at the end of the year.
charitable purposes (see line 4 on
less than 95% of its total use is for
page 23) or set aside and taken as a
Line 3. Combine all other
charitable purposes, a reasonable
qualifying distribution (see Part XII).
program-related investments and enter
allocation must be made between
the total on the line 3 Amount column. List
charitable and noncharitable use.
Line 1c — Fair market value of all other
the individual investments or groups of
assets. The fair market value of assets
Excluded property. Certain assets
investments included (attach a schedule if
other than securities is determined
are excluded entirely from the
necessary).
annually except as described below. The
computation of the minimum investment
valuation may be made by private
The total of lines 1 through 3 in
return. These include pledges of grants
foundation employees or by any other
TIP
the Amount column must equal
and contributions to be received in the
person even if that person is a
the amount reported on line 1b of
future and future interests in estates and
disqualified person. If the IRS accepts the
Part XII.
trusts. See Pub. 578, chapter VII, for
valuation, it is valid only for the tax year
more details.
Part X—Minimum
for which it is made. A new valuation is
Line 1a — Average monthly fair market
required for the next tax year.
value of securities. If market quotations
Investment Return
5-year valuation. A written, certified,
are readily available, a foundation may
and independent appraisal of the fair
Who must complete this section? All
use any reasonable method to determine
market value of any real estate, including
domestic foundations must complete
the average monthly fair market value of
any improvements, may be determined
Part X.
securities such as common and preferred
on a 5-year basis by a qualified person.
stock, bonds, and mutual fund shares, as
Foreign foundations that checked box
long as that method is consistently used.
The qualified person may not be a
D2 on page 1 do not have to complete
For example, a value for a particular
disqualified person (see General
Part X unless claiming status as a private
month might be determined by the closing
Instruction C) with respect to the private
operating foundation.
price on the first or last trading days of the
foundation or an employee of the
Private operating foundations,
month or an average of the closing prices
foundation.
described in sections 4942(j)(3) or
on the first and last trading days of the
Commonly accepted valuation
4942(j)(5), must complete Part X in order
month. Market quotations are considered
methods must be used in making the
to complete Part XIV.
readily available if a security is any of the
appraisal. A valuation based on
Overview. A private foundation that is
following:
acceptable methods of valuing property
•
not a private operating foundation must
Listed on the New York or American
for Federal estate tax purposes will be
pay out, as qualifying distributions, its
stock exchange or any city or regional
considered acceptable.
minimum investment return. This is
exchange in which quotations appear on
The appraisal must include a closing
generally 5% of the total fair market value
a daily basis, including foreign securities
statement that, in the appraiser’s opinion,
of its noncharitable assets, subject to
listed on a recognized foreign national or
the appraised assets were valued
further adjustments as explained in the
regional exchange.
•
according to valuation principles regularly
instructions for Part XI. The amount of
Regularly traded in the national or
employed in making appraisals of such
this minimum investment return is figured
regional over-the-counter market for
property, using all reasonable valuation
in Part X and is used in Part XI to figure
which published quotations are available.
•
methods. The foundation must keep a
the amount that is required to be paid out
Locally traded, for which quotations can
copy of the independent appraisal for its
(the distributable amount).
be readily obtained from established
records. If a valuation is reasonable, the
Minimum investment return. In figuring
brokerage firms.
foundation may use it for the tax year for
If securities are held in trust for, or on
the minimum investment return, include
which the valuation is made and for each
only those assets that are not actually
behalf of, a foundation by a bank or other
of the 4 following tax years.
used or held for use by the organization
financial institution that values those
Any valuation of real estate by a
securities periodically using a computer
for a charitable, educational, or other
certified independent appraisal may be
similar function that contributed to the
pricing system, a foundation may use that
replaced during the 5-year period by a
charitable status of the foundation. Cash
system to determine the value of the
subsequent 5-year certified independent
securities. The system must be
on hand and on deposit is considered
appraisal or by an annual valuation as
used or held for use for charitable
acceptable to the IRS for Federal estate
described above. The most recent
tax purposes.
purposes only to the extent of the
valuation should be used to compute the
reasonable cash balances reported in
The foundation may reduce the fair
foundation’s minimum investment return.
Part X, line 4. See the instructions for
market value of securities only to the
lines 1b and 4 below.
If the valuation is made according to
extent that it can establish that the
the above rules, the IRS will continue to
Assets that are held for the production
securities could only be liquidated in a
accept it during the 5-year period for
of income or for investment are not
reasonable period of time at a price less
which it applies even if the actual fair
considered to be used directly for
than the fair market value because of:
•
market value of the property changes
charitable functions even though the
The size of the block of the securities;
•
during the period.
income from the assets is used for the
The fact that the securities held are
charitable functions. It is a factual
securities in a closely held corporation; or
Valuation date. An asset required to
•
question whether an asset is held for the
The fact that the sale of the securities
be valued annually may be valued as of
production of income or for investment
would result in a forced or distress sale.
any day in the private foundation’s tax
-22-
Form 990-PF Instructions
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