Instructions For Form 990-Pf - Return Of Private Foundation Or Section 4947(A)(1) Nonexempt Charitable Trust Treated As A Private Foundation - Return Of Private Foundation Or Section 4947(A)(1) Nonexempt Charitable Trust Treated As A Private Foundation - Page 23
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31a daily basis, including foreign securities
for federal estate tax purposes will be
5. A statement that explains why the
listed on a recognized foreign national or
considered acceptable.
claimed discount is appropriate in valuing
regional exchange,
the asset or group of assets for section
The appraisal must include a closing
•
Regularly traded in the national or
4942 purposes.
statement that, in the appraiser’s opinion,
regional over-the-counter market for
the appraised assets were valued
In the case of securities, there are
which published quotations are
according to valuation principles regularly
certain limitations on the size of the
available, or
employed in making appraisals of such
•
reduction in value that can be claimed.
Locally traded, for which quotations can
property, using all reasonable valuation
See the instructions for Part X, line 1a.
be readily obtained from established
methods. The foundation must keep a
brokerage firms.
Line 2 — Acquisition indebtedness.
copy of the independent appraisal for its
Enter the total acquisition indebtedness
If securities are held in trust for, or on
records. If a valuation is reasonable, the
that applies to assets included on line 1.
behalf of, a foundation by a bank or other
foundation may use it for the tax year for
For details, see section 514(c)(1).
financial institution that values those
which the valuation is made and for each
securities periodically using a computer
of the 4 following tax years.
Line 4 — Cash deemed held for
pricing system, a foundation may use that
charitable activities. Foundations may
Any valuation of real estate by a
system to determine the value of the
exclude from the assets used in the
certified independent appraisal may be
securities. The system must be
minimum investment return computation
replaced during the 5-year period by a
acceptable to the IRS for federal estate
the reasonable cash balances necessary
subsequent 5-year certified independent
tax purposes.
to cover current administrative expenses
appraisal or by an annual valuation as
and other normal and current
The foundation may reduce the fair
described above. The most recent
disbursements directly connected with the
market value of securities only to the
valuation should be used to compute the
charitable, educational, or other similar
extent that it can establish that the
foundation’s minimum investment return.
activities. The amount of cash that may
securities could only be liquidated in a
If the valuation is made according to
be excluded is generally 1
1
/
% of the fair
2
reasonable period of time at a price less
the above rules, the IRS will continue to
market value of all assets (minus any
than the fair market value because of:
accept it during the 5-year period for
•
acquisition indebtedness) as computed in
The size of the block of the securities,
which it applies even if the actual fair
•
Part X, line 3. However, if under the facts
The fact that the securities held are
market value of the property changes
and circumstances an amount larger than
securities in a closely held corporation, or
during the period.
•
the deemed amount is necessary to pay
The fact that the sale of the securities
expenses and disbursements, then you
Valuation date. An asset required to
would result in a forced or distress sale.
may enter the larger amount instead of
be valued annually may be valued as of
Any reduction in value allowed under
1
1
/
% of the fair market value on line 4. If
any day in the private foundation’s tax
2
these provisions may not be more than
you use a larger amount, attach an
year, provided the foundation values the
10% of the fair market value (determined
explanation.
asset as of that date in all tax years.
without regard to any reduction in value).
However, a valuation of real estate
Line 6 — Short tax periods. If the
Also, see Regulations sections
determined on a 5-year basis by a
foundation’s tax period is less than 12
certified, independent appraisal may be
53.4942(a)-2(c)(4)(i)(b), (c), and (iv)(a).
months, determine the applicable
made as of any day in the first tax year of
percentage by dividing the number of
Line 1b — Average of monthly cash
the foundation to which the valuation
days in the short tax period by 365 (or
balances. Compute cash balances on a
applies.
366 in a leap year). Multiply the result by
monthly basis by averaging the amount of
5%. Then multiply the modified
cash on hand on the first and last days of
Assets held for less than a tax year.
percentage by the amount on line 5 and
To determine the value of an asset held
each month. Include all cash balances
enter the result on line 6.
less than 1 tax year, divide the number of
and amounts that may be used for
charitable purposes (see line 4 below) or
days the foundation held the asset by the
Part XI—Distributable
number of days in the tax year. Multiply
set aside and taken as a qualifying
the result by the fair market value of the
distribution (see Part XII).
Amount
asset.
Line 1c — Fair market value of all other
If the organization is claiming status as a
Line 1e — Reduction claimed for
assets. The fair market value of assets
private operating foundation described in
other than securities is determined
blockage or other factors. If the fair
section 4942(j)(3) or (j)(5) or if it is a
market value of any securities, real estate
annually except as described below. The
foreign foundation that checked box D2
holdings, or other assets reported on lines
valuation may be made by private
on page 1, check the box in the heading
foundation employees or by any other
1a and 1c reflects a blockage discount,
for Part XI. You do not need to complete
marketability discount, or other reduction
person even if that person is a
this part. See the Part XIV instructions for
from full fair market value because of the
disqualified person. If the IRS accepts the
more details on private operating
valuation, it is valid only for the tax year
size of the asset holding or any other
foundations.
factor, enter on line 1e the aggregate
for which it is made. A new valuation is
Section 4942(j)(5) organizations are
amount of the discounts claimed. Attach
required for the next tax year.
classified as private operating foundations
an explanation that includes the following
5-year valuation. A written, certified,
for purposes of section 4942 only if they
information for each asset or group of
and independent appraisal of the fair
meet the requirements of Regulations
assets involved:
market value of any real estate, including
section 53.4942(b)-1(a)(2).
1. A description of the asset or asset
any improvements, may be determined
The distributable amount for 2005 is
group (e.g., 20,000 shares of XYZ, Inc.,
on a 5-year basis by a qualified person.
the amount that the foundation must
common stock),
The qualified person may not be a
distribute by the end of 2006 as qualifying
2. For securities, the percentage of
disqualified person (see General
distributions to avoid the 15% tax on the
the total issued and outstanding securities
Instruction C) with respect to the private
undistributed portion.
of the same class that is represented by
foundation or an employee of the
the foundation’s holding,
Line 4. Enter the total of recoveries of
foundation.
3. The fair market value of the asset
amounts treated as qualifying
Commonly accepted valuation
or asset group before any claimed
distributions for any year under section
methods must be used in making the
blockage discount or other reduction,
4942(g). Include recoveries of part or all
appraisal. A valuation based on
4. The amount of the discount
(as applicable) of grants previously made;
acceptable methods of valuing property
claimed, and
proceeds from the sale or other
-23-
Form 990-PF Instructions
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