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 - 2003 Page 23
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304. The amount of the discount
proceeds from the sale or other
foundation may elect to treat any
claimed; and
disposition of property whose cost was
repayments of the loan principal after
5. A statement that explains why the
treated as a qualifying distribution when
December 31, 1969, as qualifying
claimed discount is appropriate in valuing
the property was acquired; and any
distributions at the time of repayment,
the asset or group of assets for section
amount set aside under section 4942(g)
rather than at the earlier time that the
4942 purposes.
to the extent it is determined that this
borrowed funds were actually distributed,
amount is not necessary for the purposes
only if:
In the case of securities, there are
of the set-aside.
1. The money is used to make
certain limitations on the size of the
expenditures for a charitable or similar
Line 4b — Income distributions from
reduction in value that can be claimed.
section 4947(a)(2) trusts. The income
purpose and
See the instructions for Part X, line 1a.
2. Repayment on the loan did not start
portion of distributions from split-interest
Line 2 — Acquisition indebtedness.
until a year beginning after 1969.
trusts on amounts placed in trust after
Enter the total acquisition indebtedness
May 26, 1969, must be added to the
that applies to assets included on line 1.
On these loans, deduct any interest
distributable amount, subject to the
For details, see section 514(c)(1).
payment from gross income to compute
limitation of Regulations section
adjusted net income in the year paid.
Line 4 — Cash deemed held for
53.4942(a)-2(b)(2)(iii).
charitable activities. Foundations may
Election. To make this election,
A “split-interest trust” is defined in
exclude from the assets used in the
attach a statement to Form 990-PF for the
section 4947(a)(2) as a trust that is not
minimum investment return computation
first tax year beginning after 1969 in
exempt from tax under section 501(a), not
the reasonable cash balances necessary
which a repayment of loan principal is
all of the unexpired interests of which are
to cover current administrative expenses
made and for each tax year after that in
devoted to charitable, religious,
and other normal and current
which any repayment of loan principal is
educational, and like purposes, and that
disbursements directly connected with the
made. The statement should show:
•
has amounts in trust for which a
charitable, educational, or other similar
The lender’s name and address.
•
charitable contributions deduction has
activities. The amount of cash that may
The amount borrowed.
•
been allowed.
be excluded is generally 1
1
/
% of the fair
The specific use of the borrowed funds.
2
•
market value of all assets (minus any
If the foundation receives distributions
The private foundation’s election to
acquisition indebtedness) as computed in
that include amounts placed in trust
treat repayments of loan principal as
Part X, line 3. However, if under the facts
before May 27, 1969, and amounts
qualifying distributions.
and circumstances an amount larger than
placed in trust after May 26, 1969, these
Line 1b — Program-related
the deemed amount is necessary to pay
distributions must be allocated between
investments. Enter the total of the
expenses and disbursements, then you
those amounts to determine the extent to
“Amount” column from Part IX-B. See the
may enter the larger amount instead of
which the distributions are included in the
Part IX-B instructions for the definition of
1
1
/
% of the fair market value on line 4. If
foundation’s distributable amount.
2
program-related investments.
you use a larger amount, attach an
Line 6 — Deduction from distributable
Line 3 — Amounts set aside. Amounts
explanation.
amount. If the foundation was organized
set aside may be treated as qualifying
Line 6 — Short tax periods. If the
before May 27, 1969, and its governing
distributions only if the private foundation
foundation’s tax period is less than 12
instrument or any other instrument
establishes to the satisfaction of the IRS
months, determine the applicable
continues to require the accumulation of
that the amount will be paid for the
percentage by dividing the number of
income after a judicial proceeding to
specific project within 60 months from the
days in the short tax period by 365 (or
reform the instrument has terminated,
date of the first set-aside and meets 1 or
366 in a leap year). Multiply the result by
then the amount of the income required to
2 below.
5%. Then multiply the modified
be accumulated must be subtracted from
1. The project can be better
percentage by the amount on line 5 and
the distributable amount beginning with
accomplished by a set-aside than by the
enter the result on line 6.
the first tax year after the tax year in
immediate payment of funds (suitability
which the judicial proceeding was
test) or
Part XI—Distributable
terminated. (See the instructions for Part
2. The private foundation meets the
VII-A, line 6.)
Amount
requirements of section 4942(g)(2)(B)(ii)
(cash distribution test).
If the organization is claiming status as a
Part XII—Qualifying
private operating foundation described in
Set-aside under item 1. For any
Distributions
section 4942(j)(3) or (j)(5) or if it is a
set-aside under 1 above, the private
foreign foundation that checked box D2
“Qualifying distributions” are amounts
foundation must apply for IRS approval by
on page 1, check the box in the heading
spent or set aside for religious,
the end of the tax year in which the
for Part XI. You do not need to complete
educational, or similar charitable
amount is set aside. Send the
this part. See the Part XIV instructions for
purposes. The total amount of qualifying
application for approval to the Internal
more details on private operating
distributions for any year is used to
Revenue Service, P.O. Box 27720,
foundations.
reduce the distributable amount for
McPherson Station, Washington, DC
specified years to arrive at the
Section 4942(j)(5) organizations are
20038.
undistributed income (if any) for those
classified as private operating foundations
The application for approval must give
years.
for purposes of section 4942 only if they
all of the following information:
•
meet the requirements of Regulations
Line 1a — Expenses, contributions,
The nature and purposes of the specific
section 53.4942(b)-1(a)(2).
gifts, etc. Enter the amount from Part I,
project and the amount of the set-aside
column (d), line 26. However, if the
The distributable amount for 2003 is
for which approval is requested;
•
borrowed funds election applies, add the
the amount that the foundation must
The amounts and approximate dates of
total of the repayments during the year to
distribute by the end of 2004 as qualifying
any planned additions to the set-aside
the amount from Part I, column (d), line
distributions to avoid the 15% tax on the
after its initial establishment;
•
26, and enter it on line 1a.
undistributed portion.
The reasons why the project can be
Line 4a. Enter the total of recoveries of
Borrowed funds. If the foundation
better accomplished by the set-aside than
amounts treated as qualifying
borrowed money in a tax year beginning
by the immediate payment of funds;
•
distributions for any year under section
before January 1, 1970, or later borrows
A detailed description of the project,
4942(g). Include recoveries of part or all
money under a written commitment
including estimated costs, sources of any
(as applicable) of grants previously made;
binding on December 31, 1969, the
future funds expected to be used for
-23-
Form 990-PF Instructions
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