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 - 2004 Page 11
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30in section 501(c)(3) or if the organization’s
(as defined in section 512(a)(5)), royalties
Limitation. The deduction for
exemption application is pending with the
received from assets devoted to
expenses paid or incurred in any tax year
IRS.
charitable activities, income from notional
for producing gross investment income
principal contracts (as defined in
earned incident to a charitable function
Check the “Section 4947(a)(1)
Regulations section 1.863-7), and other
cannot be more than the amount of
nonexempt charitable trust” box if the
substantially similar income from ordinary
income earned from the function that is
trust is a nonexempt charitable trust
and routine investments excluded by
includible as gross investment income for
treated as a private foundation. All others,
section 512(b)(1). Therefore, interest
the year.
check the “Other taxable private
received on a student loan is includible in
foundation” box.
For example, if rental income is
the gross investment income of a private
incidentally realized in 2004 from historic
I—Fair Market Value of All
foundation making the loan.
buildings held open to the public,
Assets
deductions for amounts paid or incurred
Net investment income. Net
In block I on page 1 of Form 990-PF,
in 2004 for the production of this income
investment income is the amount by
enter the fair market value of all assets
may not be more than the amount of
which the sum of gross investment
the foundation held at the end of the tax
rental income includible as gross
income and the capital gain net income
year.
investment income in column (b) for 2004.
exceeds the allowable deductions
discussed later. Tax-exempt interest on
Expenses related to tax-exempt
This amount should be the same
governmental obligations and related
interest. Do not include on lines 13 – 23
TIP
as the figure reported in Part II,
expenses are excluded.
of column (b) any expenses paid or
column (c), line 16.
incurred that are allocable to tax-exempt
Investment income. Include in column
interest that is excluded from lines 3
Part I—Analysis of
(b) all or part of any amount from column
and 4.
(a) that applies to investment income.
Revenue and Expenses
However, do not include in column (b)
Column (c) — Adjusted Net Income
any interest, dividends, rents or royalties
Column Instructions
(and related expenses) that were reported
Nonoperating private foundations
The total of amounts in columns (b), (c),
on Form 990-T.
TIP
should see item 1 under
and (d) may not necessarily equal the
Nonoperating private foundations
For example, investment income from
amounts in column (a).
on this page to find out if they need to
debt-financed property unrelated to the
The amounts entered in column (a)
complete column (c).
organization’s charitable purpose and
and on line 5b must be analyzed in Part
Private operating foundations. All
certain rents (and related expenses)
XVI-A.
organizations that claim status as private
treated as unrelated trade or business
operating foundations under section
income should be reported on Form
Column (a) — Revenue and
4942(j)(3) or (5) must complete all lines of
990-T. Income from debt-financed
Expenses per Books
column (c) that apply, according to the
property that is not taxed under section
Enter in column (a) all items of revenue
general rules for income and expenses
511 is taxed under section 4940. Thus, if
and expense shown in the books and
that apply to this column, the specific line
the debt/basis percentage of a
records that increased or decreased the
instructions for lines 3 – 27c, the Special
debt-financed property is 80%, only 80%
net assets of the organization. However,
rule, and Examples 1 and 2 below.
of the gross income (and expenses) for
do not include the value of services
that property is used to figure the section
General rules. In general, adjusted net
donated to the foundation, or items such
511 tax on Form 990-T. The remaining
income is the amount of a private
as the free use of equipment or facilities,
20% of the gross income (and expenses)
foundation’s gross income that is more
in contributions received. Also, do not
of that property is used to figure the
than the expenses of earning the income.
include any expenses used to compute
section 4940 tax on net investment
The modifications and exclusions
capital gains and losses on lines 6, 7, and
income on Form 990-PF. (See Form
explained below are applied to gross
8 or expenses included in cost of goods
990-T and its instructions for more
income and expenses in figuring adjusted
sold on line 10b.
information.)
net income.
Column (b) — Net Investment
Investment expenses. Include in
For income and expenses, include on
Income
column (b) all ordinary and necessary
each line of column (c) only that portion of
All domestic private foundations
expenses paid or incurred to produce or
the amount from column (a) that is
(including section 4947(a)(1) nonexempt
collect investment income from: interest,
applicable to the adjusted net income
charitable trusts) are required to pay an
computation.
dividends, rents, amounts received from
excise tax each tax year on net
payments on securities loans (as defined
Income. For column (c), include
investment income.
in section 512(a)(5)), royalties, income
income from charitable functions,
from notional principal contracts, and
Exempt foreign foundations are
investment activities, short-term capital
other substantially similar income from
subject to an excise tax on gross
gains from investments, amounts set
ordinary and routine investments
investment income from U.S. sources.
aside, and unrelated trade or business
excluded by section 512(b)(1); or for the
These foreign organizations should
activities. Do not include gifts, grants, or
management, conservation, or
complete lines 3, 4, 5, 11, 12, and 27b of
contributions, or long-term capital gains or
maintenance of property held for the
column (b) and report only income
losses.
production of income that is taxable under
derived from U.S. sources. No other
Expenses. Deductible expenses
section 4940.
income should be included. No expenses
include the part of a private foundation’s
are allowed as deductions.
If any of the expenses listed in column
operating expenses that is paid or
Definitions
(a) are paid or incurred for both
incurred to produce or collect gross
Gross investment income. Gross
investment and charitable purposes, they
income reported on lines 3 – 11 of column
investment income is the total amount of
must be allocated on a reasonable basis
(c). If only part of the property produces
investment income that was received by a
between the investment activities and the
income includible in column (c),
private foundation from all sources.
charitable activities so that only expenses
deductions such as interest, taxes, and
However, it does not include any income
from investment activities appear in
rent must be divided between the
subject to the unrelated business income
column (b). Examples of allocation
charitable and noncharitable uses of the
tax. It includes interest, dividends, rents,
methods are given in the instructions for
property. If the deductions for property
payments with respect to securities loans
Part IX-A.
used for a charitable, educational, or
-11-
Form 990-PF Instructions
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