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 25
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3210% of the fair market value (determined
determined on a 5-year basis by a
percentage by dividing the number of
without regard to any reduction in value).
certified, independent appraisal may be
days in the short tax period by 365 (or
made as of any day in the first tax year of
366 in a leap year). Multiply the result by
Also, see Regulations sections
the foundation to which the valuation
5%. Then multiply the modified
53.4942(a)-2(c)(4)(i)(b), (c), and (iv)(a).
applies.
percentage by the amount on line 5 and
Line 1b. Average of monthly cash
enter the result on line 6.
Assets held for less than a tax year.
balances. Compute cash balances on a
To determine the value of an asset held
monthly basis by averaging the amount of
Part XI. Distributable
less than 1 tax year, divide the number of
cash on hand on the first and last days of
days the foundation held the asset by the
Amount
each month. Include all cash balances
number of days in the tax year. Multiply
and amounts that may be used for
If the organization is claiming status as a
the result by the fair market value of the
charitable purposes (see line 4 below) or
private operating foundation described in
asset.
set aside and taken as a qualifying
section 4942(j)(3) or (j)(5) or if it is a
Line 1e. Reduction claimed for
distribution (see Part XII).
foreign foundation that checked box D2
blockage or other factors. If the fair
Line 1c. Fair market value of all other
on page 1, check the box in the heading
market value of any securities, real estate
assets. The fair market value of assets
for Part XI. You do not need to complete
holdings, or other assets reported on lines
other than securities is determined
this part. See the Part XIV instructions for
1a and 1c reflects a blockage discount,
annually except as described below. The
more details on private operating
marketability discount, or other reduction
valuation may be made by private
foundations.
from full fair market value because of the
foundation employees or by any other
Section 4942(j)(5) foundations are
size of the asset holding or any other
person even if that person is a
classified as private operating foundations
factor, enter on line 1e the aggregate
disqualified person. If the IRS accepts the
for purposes of section 4942 only if they
amount of the discounts claimed. Attach
valuation, it is valid only for the tax year
meet the requirements of Regulations
an explanation that includes the following
for which it is made. A new valuation is
section 53.4942(b)-1(a)(2).
information for each asset or group of
required for the next tax year.
assets involved:
The distributable amount for 2010 is
5-year valuation. A written, certified,
the amount that the foundation must
1. A description of the asset or asset
and independent appraisal of the fair
distribute by the end of 2011 as qualifying
group (for example, 20,000 shares of
market value of any real estate, including
distributions to avoid the 30% tax on the
XYZ, Inc., common stock),
any improvements, may be determined
undistributed portion.
2. For securities, the percentage of
on a 5-year basis by a qualified person.
the total issued and outstanding securities
Line 4. Enter the total of recoveries of
The qualified person may not be a
of the same class that is represented by
amounts treated as qualifying
disqualified person (see General
the foundation’s holding,
distributions for any year under section
Instruction C) with respect to the private
3. The fair market value of the asset
4942(g). Include recoveries of part or all
foundation or an employee of the
or asset group before any claimed
(as applicable) of grants previously made,
foundation.
blockage discount or other reduction,
proceeds from the sale or other
4. The amount of the discount
disposition of property whose cost was
Commonly accepted valuation
claimed, and
treated as a qualifying distribution when
methods must be used in making the
5. A statement that explains why the
the property was acquired, and any
appraisal. A valuation based on
claimed discount is appropriate in valuing
amount set aside under section 4942(g)
acceptable methods of valuing property
the asset or group of assets for section
to the extent it is determined that this
for federal estate tax purposes will be
4942 purposes.
amount is not necessary for the purposes
considered acceptable.
of the set-aside.
The appraisal must include a closing
In the case of securities, there are
Line 6. Deduction from distributable
statement that, in the appraiser’s opinion,
certain limitations on the size of the
amount. If the foundation was organized
the appraised assets were valued
reduction in value that can be claimed.
before May 27, 1969, and its governing
according to valuation principles regularly
See the instructions for Part X, line 1a.
instrument or any other instrument
employed in making appraisals of such
Line 2. Acquisition indebtedness.
continues to require the accumulation of
property, using all reasonable valuation
Enter the total acquisition indebtedness
income after a judicial proceeding to
methods. The foundation must keep a
that applies to assets included on line 1.
reform the instrument has terminated,
copy of the independent appraisal for its
For details, see section 514(c)(1).
then the income required to be
records. If a valuation is reasonable, the
Line 4. Cash deemed held for
accumulated must be subtracted from the
foundation may use it for the tax year for
charitable activities. Foundations may
distributable amount beginning with the
which the valuation is made and for each
exclude from the assets used in the
first tax year after the tax year in which
of the 4 following tax years.
minimum investment return computation
the judicial proceeding was terminated.
Any valuation of real estate by a
the reasonable cash balances necessary
(See the instructions for Part VII-A, line
certified independent appraisal may be
to cover current administrative expenses
6.)
replaced during the 5-year period by a
and other normal and current
subsequent 5-year certified independent
Part XII. Qualifying
disbursements directly connected with the
appraisal or by an annual valuation as
charitable, educational, or other similar
Distributions
described above. The most recent
activities. The amount of cash that may
valuation should be used to compute the
be excluded is generally 1
/
% of the fair
“Qualifying distributions” are amounts
1
2
foundation’s minimum investment return.
market value of all assets (minus any
spent or set aside for religious,
If the valuation is made according to
acquisition indebtedness) as computed in
educational, or similar charitable
the above rules, the IRS will continue to
Part X, line 3. However, if under the facts
purposes. The total amount of qualifying
accept it during the 5-year period for
and circumstances an amount larger than
distributions for any year is used to
which it applies even if the actual fair
the deemed amount is necessary to pay
reduce the distributable amount for
market value of the property changes
expenses and disbursements, then you
specified years to arrive at the
during the period.
may enter the larger amount instead of
undistributed income (if any) for
1
/
% of the fair market value on line 4. If
those years.
1
Valuation date. An asset required to
2
you use a larger amount, attach an
be valued annually may be valued as of
Line 1a. Expenses, contributions, gifts,
explanation.
any day in the private foundation’s tax
etc. Enter the amount from Part I, line
year, provided the foundation values the
Line 6. Short tax periods. If the
26, column (d). However, if the borrowed
asset as of that date in all tax years.
foundation’s tax period is less than 12
funds election applies, add the total of the
However, a valuation of real estate
months, determine the applicable
repayments during the year to the amount
-25-
Form 990-PF Instructions
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