Instructions For Form 990-Pf - Return Of Private Foundation Or Section 4947(A)(1) Nonexempt Charitable Trust Treated As A Private Foundation - Internal Revenue Service - 2010 Page 24
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32particular activity. These include, among
but may be grouped with other
For example, an office building used to
others, compensation and travel
program-related investments of the same
provide offices for employees engaged in
expenses of employees and officers
type. Loans to other section 501(c)(3)
managing endowment funds for the
directly engaged in an activity, the cost of
organizations and all other types of
foundation is not considered an asset
materials and supplies utilized in
program-related investments must be
used for charitable purposes.
conducting the activity, and fees paid to
listed separately on lines 1 through 3 or
Dual-use property. When property
outside firms and individuals in
on an attachment.
is used both for charitable and other
connection with a specific activity.
Lines 1 and 2. List the two largest
purposes, the property is considered used
Indirect (overhead) expenses are
program-related investments made by the
entirely for charitable purposes if 95% or
those that are not specifically identified as
foundation in 2010, whether or not the
more of its total use is for that purpose. If
connected with a particular activity but
investments were still held by the
less than 95% of its total use is for
that relate to the direct costs incurred in
foundation at the end of the year.
charitable purposes, a reasonable
conducting the activity. Examples of
allocation must be made between
Line 3. Combine all other
indirect expenses include:
charitable and noncharitable use.
program-related investments and enter
•
Occupancy expenses;
the total on the line 3 Amount column. List
Excluded property. Certain assets
•
Supervisory and clerical compensation;
the individual investments or groups of
are excluded entirely from the
•
Repair, rental, and maintenance of
investments included (attach a schedule if
computation of the minimum investment
equipment;
necessary).
return. These include pledges of grants
•
Expenses of other departments or cost
and contributions to be received in the
The total of lines 1 through 3 in
centers (such as accounting, personnel,
future and future interests in estates and
the Amount column must equal
and payroll departments or units) that
TIP
trusts.
the amount reported on line 1b of
service the department or function that
Part XII.
incurs the direct expenses of conducting
Line 1a. Average monthly fair market
an activity; and
value of securities. If market quotations
Part X. Minimum
•
Other applicable general and
are readily available, a foundation may
administrative expenses, including the
Investment Return
use any reasonable method to determine
compensation of top management, to the
the average monthly fair market value of
extent reasonably allocable to a particular
Who must complete this section? All
securities such as common and preferred
activity.
domestic foundations must complete
stock, bonds, and mutual fund shares, as
Part X.
long as that method is consistently used.
No specific method of allocation is
For example, a value for a particular
required. The method used, however,
Foreign foundations that checked box
month might be determined by the closing
must be reasonable and must be used
D2 on page 1 do not have to complete
price on the first or last trading days of the
consistently.
Part X unless claiming status as a private
month or an average of the closing prices
operating foundation.
Examples of acceptable allocation
on the first and last trading days of the
methods include:
Private operating foundations
month. Market quotations are considered
•
Compensation allocated on a time
described in sections 4942(j)(3) or
readily available if a security is any of the
basis,
4942(j)(5) must complete Part X in order
following:
•
Employee benefits allocated on the
to complete Part XIV.
•
Listed on the New York or American
basis of direct salary expenses,
Overview. A private foundation that is
Stock Exchange or any city or regional
•
Travel, conference, and meeting
not a private operating foundation must
exchange in which quotations appear on
expenses charged directly to the activity
pay out, as qualifying distributions, its
a daily basis, including foreign securities
that incurred the expense,
minimum investment return. This is
listed on a recognized foreign national or
•
Occupancy expenses allocated on a
generally 5% of the total fair market value
regional exchange,
space-utilized basis, and
•
of its noncharitable assets, subject to
Regularly traded in the national or
•
Other indirect expenses allocated on
further adjustments as explained in the
regional over-the-counter market for
the basis of direct salary expenses or
instructions for Part XI. The amount of
which published quotations are
total direct expenses.
this minimum investment return is figured
available, or
•
in Part X and is used in Part XI to figure
Locally traded, for which quotations can
Part IX-B. Summary of
the amount required to be paid out (the
be readily obtained from established
Program-Related
distributable amount).
brokerage firms.
Investments
Minimum investment return. In figuring
If securities are held in trust for, or on
the minimum investment return, include
behalf of, a foundation by a bank or other
Program-related investment. Section
only those assets that are not actually
financial institution that values those
4944(c) and corresponding regulations
used or held for use by the organization
securities periodically using a computer
define a program-related investment as
for a charitable, educational, or other
pricing system, a foundation may use that
one that is made primarily to accomplish
similar function that contributed to the
system to determine the value of the
a charitable purpose of the foundation
charitable status of the foundation. Cash
securities. The system must be
and no substantial purpose of which is to
on hand and on deposit is considered
acceptable to the IRS for federal estate
produce investment income or a capital
used or held for use for charitable
tax purposes.
gain from the sale of the investment.
purposes only to the extent of the
Examples of program-related investments
The foundation may reduce the fair
reasonable cash balances reported in
include educational loans to individuals
market value of securities only to the
Part X, line 4. See the instructions for
and low-interest loans to other section
extent that it can establish that the
lines 1b and 4 below .
501(c)(3) organizations.
securities could only be liquidated in a
Assets held for the production of
reasonable period of time at a price less
General instructions. Include only
income or for investment are not
than the fair market value because of:
those investments that were reported in
considered to be used directly for
•
The size of the block of the securities,
Part XII, line 1b for the current year. Do
charitable functions even though the
•
The fact that the securities held are
not include any investments made in any
income from the assets is used for
securities in a closely held corporation, or
prior year even if they were still held by
charitable functions. It is a factual
•
The fact that the sale of the securities
the foundation at the end of 2010.
question whether an asset is held for the
would result in a forced or distress sale.
Investments consisting of loans to
production of income or for investment
individuals (such as educational loans)
rather than used or held for use directly
Any reduction in value allowed under
are not required to be listed separately
by the foundation for charitable purposes.
these provisions may not be more than
-24-
Form 990-PF Instructions
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