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 23
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30foundation or an employee of the
of the same class that is represented by
distributions to avoid the 15% tax on the
foundation.
the foundation’s holding,
undistributed portion.
3. The fair market value of the asset
Line 4. Enter the total of recoveries of
Commonly accepted valuation
or asset group before any claimed
amounts treated as qualifying
methods must be used in making the
blockage discount or other reduction,
distributions for any year under section
appraisal. A valuation based on
4. The amount of the discount
4942(g). Include recoveries of part or all
acceptable methods of valuing property
claimed, and
(as applicable) of grants previously made;
for federal estate tax purposes will be
5. A statement that explains why the
proceeds from the sale or other
considered acceptable.
claimed discount is appropriate in valuing
disposition of property whose cost was
The appraisal must include a closing
the asset or group of assets for section
treated as a qualifying distribution when
statement that, in the appraiser’s opinion,
4942 purposes.
the property was acquired; and any
the appraised assets were valued
amount set aside under section 4942(g)
according to valuation principles regularly
In the case of securities, there are
to the extent it is determined that this
employed in making appraisals of such
certain limitations on the size of the
amount is not necessary for the purposes
property, using all reasonable valuation
reduction in value that can be claimed.
of the set-aside.
methods. The foundation must keep a
See the instructions for Part X, line 1a.
Line 6 — Deduction from distributable
copy of the independent appraisal for its
Line 2 — Acquisition indebtedness.
amount. If the foundation was organized
records. If a valuation is reasonable, the
Enter the total acquisition indebtedness
before May 27, 1969, and its governing
foundation may use it for the tax year for
that applies to assets included on line 1.
instrument or any other instrument
which the valuation is made and for each
For details, see section 514(c)(1).
continues to require the accumulation of
of the 4 following tax years.
income after a judicial proceeding to
Line 4 — Cash deemed held for
Any valuation of real estate by a
reform the instrument has terminated,
charitable activities. Foundations may
certified independent appraisal may be
then the amount of the income required to
exclude from the assets used in the
replaced during the 5-year period by a
be accumulated must be subtracted from
minimum investment return computation
subsequent 5-year certified independent
the distributable amount beginning with
the reasonable cash balances necessary
appraisal or by an annual valuation as
the first tax year after the tax year in
to cover current administrative expenses
described above. The most recent
which the judicial proceeding was
and other normal and current
valuation should be used to compute the
terminated. (See the instructions for Part
disbursements directly connected with the
foundation’s minimum investment return.
VII-A, line 6.)
charitable, educational, or other similar
activities. The amount of cash that may
If the valuation is made according to
Part XII—Qualifying
the above rules, the IRS will continue to
be excluded is generally 1
1
/
% of the fair
2
accept it during the 5-year period for
market value of all assets (minus any
Distributions
acquisition indebtedness) as computed in
which it applies even if the actual fair
“Qualifying distributions” are amounts
market value of the property changes
Part X, line 3. However, if under the facts
spent or set aside for religious,
during the period.
and circumstances an amount larger than
educational, or similar charitable
the deemed amount is necessary to pay
Valuation date. An asset required to
purposes. The total amount of qualifying
expenses and disbursements, then you
be valued annually may be valued as of
distributions for any year is used to
may enter the larger amount instead of
any day in the private foundation’s tax
reduce the distributable amount for
1
/
% of the fair market value on line 4. If
1
2
year, provided the foundation values the
specified years to arrive at the
you use a larger amount, attach an
asset as of that date in all tax years.
undistributed income (if any) for those
explanation.
However, a valuation of real estate
years.
determined on a 5-year basis by a
Line 6 — Short tax periods. If the
Line 1a — Expenses, contributions,
certified, independent appraisal may be
foundation’s tax period is less than 12
gifts, etc. Enter the amount from Part I,
made as of any day in the first tax year of
months, determine the applicable
column (d), line 26. However, if the
percentage by dividing the number of
the foundation to which the valuation
borrowed funds election applies, add the
applies.
days in the short tax period by 365 (or
total of the repayments during the year to
366 in a leap year). Multiply the result by
the amount from Part I, column (d), line
Assets held for less than a tax year.
5%. Then multiply the modified
To determine the value of an asset held
26, and enter it on line 1a.
percentage by the amount on line 5 and
less than 1 tax year, divide the number of
Borrowed funds. If the foundation
enter the result on line 6.
days the foundation held the asset by the
borrowed money in a tax year beginning
number of days in the tax year. Multiply
before January 1, 1970, or later borrows
Part XI—Distributable
the result by the fair market value of the
money under a written commitment
asset.
Amount
binding on December 31, 1969, the
foundation may elect to treat any
Line 1e — Reduction claimed for
If the organization is claiming status as a
repayments of the loan principal after
blockage or other factors. If the fair
private operating foundation described in
December 31, 1969, as qualifying
market value of any securities, real estate
section 4942(j)(3) or (j)(5) or if it is a
distributions at the time of repayment,
holdings, or other assets reported on lines
foreign foundation that checked box D2
rather than at the earlier time that the
1a and 1c reflects a blockage discount,
on page 1, check the box in the heading
borrowed funds were actually distributed,
marketability discount, or other reduction
for Part XI. You do not need to complete
only if:
from full fair market value because of the
this part. See the Part XIV instructions for
size of the asset holding or any other
1. The money is used to make
more details on private operating
factor, enter on line 1e the aggregate
expenditures for a charitable or similar
foundations.
amount of the discounts claimed. Attach
purpose, and
Section 4942(j)(5) organizations are
an explanation that includes the following
2. Repayment on the loan did not start
classified as private operating foundations
information for each asset or group of
until a year beginning after 1969.
for purposes of section 4942 only if they
assets involved:
meet the requirements of Regulations
On these loans, deduct any interest
1. A description of the asset or asset
section 53.4942(b)-1(a)(2).
payment from gross income to compute
group (e.g., 20,000 shares of XYZ, Inc.,
adjusted net income in the year paid.
common stock),
The distributable amount for 2004 is
2. For securities, the percentage of
the amount that the foundation must
Election. To make this election,
the total issued and outstanding securities
distribute by the end of 2005 as qualifying
attach a statement to Form 990-PF for the
-23-
Form 990-PF Instructions
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