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 22
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30•
Employee benefits that are allocated on
4942(j)(5), must complete Part X in order
month. Market quotations are considered
the basis of direct salary expenses,
to complete Part XIV.
readily available if a security is any of the
•
Travel, conference, and meeting
following:
Overview. A private foundation that is
•
expenses that are charged directly to the
Listed on the New York or American
not a private operating foundation must
activity that incurred the expense,
Stock Exchange or any city or regional
pay out, as qualifying distributions, its
•
Occupancy expenses that are allocated
exchange in which quotations appear on
minimum investment return. This is
on a space-utilized basis, and
a daily basis, including foreign securities
generally 5% of the total fair market value
•
Other indirect expenses that are
listed on a recognized foreign national or
of its noncharitable assets, subject to
allocated on the basis of direct salary
regional exchange,
further adjustments as explained in the
•
expenses or total direct expenses.
Regularly traded in the national or
instructions for Part XI. The amount of
regional over-the-counter market for
this minimum investment return is figured
Part IX-B—Summary of
which published quotations are available,
in Part X and is used in Part XI to figure
or
the amount that is required to be paid out
Program-Related
•
Locally traded, for which quotations can
(the distributable amount).
Investments
be readily obtained from established
Minimum investment return. In figuring
brokerage firms.
the minimum investment return, include
Program-related investment. Section
only those assets that are not actually
If securities are held in trust for, or on
4944(c) and corresponding regulations
used or held for use by the organization
behalf of, a foundation by a bank or other
define a program-related investment as
for a charitable, educational, or other
financial institution that values those
one that is made primarily to accomplish
similar function that contributed to the
securities periodically using a computer
a charitable purpose of the foundation
charitable status of the foundation. Cash
pricing system, a foundation may use that
and no substantial purpose of which is to
on hand and on deposit is considered
system to determine the value of the
produce investment income or a capital
used or held for use for charitable
securities. The system must be
gain from the sale of the investment.
purposes only to the extent of the
acceptable to the IRS for federal estate
Examples of program-related investments
reasonable cash balances reported in
tax purposes.
include educational loans to individuals
Part X, line 4. See the instructions for
and low-interest loans to other section
The foundation may reduce the fair
lines 1b and 4 below.
501(c)(3) organizations.
market value of securities only to the
Assets that are held for the production
General instructions. Include only
extent that it can establish that the
of income or for investment are not
those investments that were reported in
securities could only be liquidated in a
considered to be used directly for
Part XII, line 1b, for the current year. Do
reasonable period of time at a price less
charitable functions even though the
not include any investments made in any
than the fair market value because of:
•
income from the assets is used for the
prior year even if they were still held by
The size of the block of the securities,
•
charitable functions. It is a factual
the foundation at the end of 2004.
The fact that the securities held are
question whether an asset is held for the
securities in a closely held corporation, or
Investments consisting of loans to
•
production of income or for investment
The fact that the sale of the securities
individuals (such as educational loans)
rather than used or held for use directly
would result in a forced or distress sale.
are not required to be listed separately
by the foundation for charitable purposes.
but may be grouped with other
Any reduction in value allowed under
For example, an office building that is
program-related investments of the same
these provisions may not be more than
used to provide offices for employees
type. Loans to other section 501(c)(3)
10% of the fair market value (determined
engaged in managing endowment funds
organizations and all other types of
without regard to any reduction in value).
for the foundation is not considered an
program-related investments must be
Also, see Regulations sections
asset used for charitable purposes.
listed separately on lines 1 through 3 or
53.4942(a)-2(c)(4)(i)(b), (c), and (iv)(a).
on an attachment.
Dual-use property. When property is
used both for charitable and other
Lines 1 and 2. List the two largest
Line 1b — Average of monthly cash
purposes, the property is considered used
balances. Compute cash balances on a
program-related investments made by the
entirely for charitable purposes if 95% or
monthly basis by averaging the amount of
foundation in 2004, whether or not the
more of its total use is for that purpose. If
investments were still held by the
cash on hand on the first and last days of
less than 95% of its total use is for
each month. Include all cash balances
foundation at the end of the year.
charitable purposes, a reasonable
and amounts that may be used for
Line 3. Combine all other
allocation must be made between
charitable purposes (see line 4 on page
program-related investments and enter
charitable and noncharitable use.
23) or set aside and taken as a qualifying
the total on the line 3 Amount column. List
distribution (see Part XII).
Excluded property. Certain assets
the individual investments or groups of
are excluded entirely from the
investments included (attach a schedule if
Line 1c — Fair market value of all other
computation of the minimum investment
necessary).
assets. The fair market value of assets
return. These include pledges of grants
other than securities is determined
The total of lines 1 through 3 in
and contributions to be received in the
annually except as described below. The
TIP
the Amount column must equal
future and future interests in estates and
valuation may be made by private
the amount reported on line 1b of
trusts. See Pub. 578, chapter VII, for
foundation employees or by any other
Part XII.
more details.
person even if that person is a
Line 1a — Average monthly fair market
disqualified person. If the IRS accepts the
Part X—Minimum
value of securities. If market quotations
valuation, it is valid only for the tax year
Investment Return
are readily available, a foundation may
for which it is made. A new valuation is
use any reasonable method to determine
required for the next tax year.
Who must complete this section? All
the average monthly fair market value of
domestic foundations must complete
5-year valuation. A written, certified,
securities such as common and preferred
Part X.
and independent appraisal of the fair
stock, bonds, and mutual fund shares, as
market value of any real estate, including
Foreign foundations that checked box
long as that method is consistently used.
any improvements, may be determined
D2 on page 1 do not have to complete
For example, a value for a particular
on a 5-year basis by a qualified person.
Part X unless claiming status as a private
month might be determined by the closing
operating foundation.
price on the first or last trading days of the
The qualified person may not be a
Private operating foundations,
month or an average of the closing prices
disqualified person (see General
described in sections 4942(j)(3) or
on the first and last trading days of the
Instruction C) with respect to the private
-22-
Form 990-PF Instructions
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