Instructions For Form 4720 (2015) (Page 14 of 19) in pdf

Specific Instructions

A partnership in which such persons

2. Complete Schedule J if you are

an entity manager of such an entity who

own more than 35% of the profits

Part I. List each excess benefit

approved the entity as (or otherwise

interest, or

transaction in Part I, column (c). Enter

caused the entity to be) a party to a

A trust or estate in which such

the date of the transaction in column (b)

PTST at any time during the tax year

persons own more than 35% of the

and the amount of the excess benefit in

and who knew (or had reason to know)

beneficial interest.

column (d). Compute the tax on the

that the transaction is a PTST.

In determining the holdings of a

excess benefit for disqualified persons

business enterprise, any stock or other

See the following guidance and any

and enter it in column (e). Compute any

interest owned directly or indirectly shall

future guidance for details.

tax on the excess benefit for

apply.

Notice 2006-65, 2006-31 I.R.B. 102;

organization managers and enter the

For donor advised funds, sponsor

amount in column (f).

Notice 2007-18, 2007-9 I.R.B. 608;

ing organizations, and certain sup

T.D. 9334, 2007-34 I.R.B. 382; and

For organization managers, the tax is

porting organization transactions

T.D. 9492, 2010-33 I.R.B. 242.

the lesser of 10% of the excess benefit

occurring after August 17, 2006. The

or $20,000. This tax is computed on

Managers of tax favored

following persons will be considered

each transaction.

retirement plans, individual

disqualified persons along with certain

TIP

retirement arrangements, and

Part II. Enter in column (a) the names

family members and 35% controlled

savings arrangements described in

of all disqualified persons who took part

entities associated with them:

sections 401(a), 403(a), 403(b), 529,

in the excess benefit transactions. If

457(b), 408(a), 220(d), 408(b), 530, or

more than one disqualified person took

Donors of donor advised funds,

223(d) must report and pay tax due

part in an excess benefit transaction,

Investment advisors of sponsoring

under section 4965(a)(2) on Form 5330.

each is individually liable for the entire

organizations, and

tax on the transaction. But the

Disqualified persons of a section

Prohibited tax shelter transaction. In

disqualified persons who are liable for

509(a)(3) supporting organization for

general, a prohibited tax shelter

the tax may prorate the payment among

the organizations that organization

transaction means any listed transaction

themselves. Enter in column (c) the tax

supports.

(including a subsequently listed

to be paid by each disqualified person.

transaction) and any prohibited

For certain supporting

Carry the total amount in column (d)

reportable transaction.

organization transactions occurring

for each disqualified person to Part II-A,

after July 25, 2006. Substantial

Listed transaction. A listed

column (h).

contributors to supporting organizations

transaction includes any transaction that

Part III. Enter in column (a) the names

will also be considered disqualified

is the same as or substantially similar to

of all managers who knowingly took part

persons along with their family members

one of the types of transactions that the

in the excess benefit transactions listed

and 35% controlled entities.

IRS has determined to be a tax

in Part I. If more than one manager

avoidance transaction. These

Donor advised fund. See the

knowingly took part in an excess benefit

transactions are identified by notice,

transaction, each is individually liable for

Schedule K instructions for a definition

regulation, or other form of published

the entire tax in connection with the

of donor advised fund.

guidance as a listed transaction. For

transaction. But the managers liable for

existing guidance, see Notice 2009-59,

Investment advisor. Investment

the tax may prorate the payment among

2009-31 I.R.B. 170.

advisor means for any sponsoring

themselves. Enter in column (c) the tax

organization, any person compensated

For updates to this list, go to the IRS

to be paid by each organization

by such organization (but not an

website at

manager.

employee of such organization) for

corporations

and click on “Abusive Tax

Carry the total amount in column (d)

managing the investment of, or

Shelters and Transactions.” The listed

for each manager to Part II-A, column

providing investment advice for assets

transactions in the above notices and

(h).

maintained in donor advised funds

rulings will also be periodically updated

maintained by such sponsoring

in future issues of the Internal Revenue

organization.

Schedule J—Taxes on

Bulletin.

Being a Party to Prohibited

Sponsoring organization. See the

Subsequently listed transaction.

Schedule K instructions for a definition

Tax Shelter Transactions

A subsequently listed transaction is a

of sponsoring organization.

transaction that is identified in published

(Section 4965)

guidance as a listed transaction after

Substantial contributor. In

the entity has entered into the

General Instructions

general, a substantial contributor means

transaction and that was not a

any person who contributed or

Requirement.

confidential transaction or transaction

bequeathed an aggregate of more than

with contractual protection at the time

1. Complete Schedule J if you are

$5,000 to the organization, if that

the entity entered into the transaction.

an entity described in section 501(c),

amount is more than 2% of the total

501(d), or 170(c) (other than the United

contributions and bequests received by

Prohibited reportable transaction. A

States) or an Indian tribal government

the organization before the end of the

prohibited reportable transaction is any

(within the meaning of section 7701(a)

tax year of the organization in which the

confidential transaction or any

(40)) and you received proceeds from or

contribution or bequest is received by

transaction with contractual protection

have net income attributable to a

the organization from such person. A

that is a reportable transaction. See

prohibited tax shelter transaction

substantial contributor includes the

Regulations sections 1.6011-4(b)(3)

(PTST).

grantor of a trust.

and (4), and the Instructions for Form

Instructions for Form 4720 (2015)

Instructions For Form 4720 (2015) Page 14

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