Instructions For Form 4720 (2015) (Page 7 of 19) in pdf

with the act. But the foundation

Initial taxes on selfdealer. An initial

Schedule A—Initial Taxes

managers liable for the tax may prorate

tax of 10% of the amount involved is

on SelfDealing (Section

the payment among themselves. Enter

charged for each act of self-dealing

in column (c) the tax to be paid by each

4941)

between a disqualified person and a

foundation manager.

private foundation for each year or part

General Instructions

of a year in the taxable period. Any

Carry the total amount in column (d)

disqualified person (other than a

for each foundation manager to Part

Requirement. All organizations that

foundation manager acting only as

II-A, column (c).

answered “Yes,” to question 1b or 1c in

such) who takes part in the act of

Part VII-B of Form 990-PF, or “Yes,” to

self-dealing must pay the tax.

Schedule B—Initial Tax on

question 75b or 75c in Part VI-B of Form

5227, must complete Schedule A.

Initial taxes on foundation manag

Undistributed Income

Complete Parts I, II, and III of

ers. When a tax is imposed on a

(Section 4942)

Schedule A only in connection with acts

foundation manager for an act of

that are subject to the tax on

self-dealing, the tax will be 5% of the

Complete Schedule B if you answered

self-dealing.

amount involved in the act of

“Yes,” to Form 990-PF, Part VII-B,

self-dealing for each year or part of a

question 2b.

Paying the tax and filing a Form 4720

year in the taxable period. However, the

is required for each year or part of a

An initial excise tax of 30% is

total tax imposed for all years in the

year in the taxable period that applies to

imposed on a private foundation's

taxable period is limited to $20,000 for

the act of self-dealing. Generally, the

undistributed income on the first day of

each act of self-dealing. The tax is

taxable period begins with the date on

the second or any succeeding tax year

imposed on any foundation manager

which the self-dealing occurs and ends

after the tax year in connection with

who took part in the act knowing that it

on the earliest of:

which income remains undistributed.

was self-dealing except those

The date a notice of deficiency is

foundation managers whose

Use the 2015 Form 4720 to report

mailed under section 6212, in

participation was not willful and was due

the initial tax on undistributed income for

connection with the initial tax imposed

to reasonable cause. Any foundation

tax years beginning in 2014 or earlier

on the self-dealer,

manager who took part in the act of

that remains undistributed at the end of

The date the initial tax on the

self-dealing must pay the tax.

the foundation's current tax year

self-dealer is assessed, or

beginning in 2015. The initial tax will not

The date correction of the act of

Specific Instructions

apply to a private foundation's

self-dealing is completed.

Part I. List each act of self-dealing in

undistributed income:

Selfdealing. Self-dealing includes any

Part I. Enter in column (d) the number

For any tax year it is an operating

direct or indirect:

designation from Form 990-PF, Part

foundation (as defined in section 4942(j)

Sale, exchange, or leasing of

VII-B, question 1a, or Form 5227, Part

(3) and related regulations or in section

property between a private foundation

VI-B, question 75a, that applies to the

4942(j)(5)), or

and a disqualified person (see

act. For example, “1a(1)” or “1a(4).”

To the extent it did not distribute an

definitions in Form 990-PF instructions),

amount solely because of an incorrect

Part II. Enter in column (a) the names

Lending of money or other extension

valuation of assets, provided the

of all disqualified persons who took part

of credit between a private foundation

foundation satisfies the requirements of

in the acts of self-dealing listed in Part I.

and a disqualified person,

section 4942(a)(2), or

If more than one disqualified person

Furnishing of goods, services, or

For any year for which the initial tax

took part in an act of self-dealing, each

facilities between a private foundation

was previously assessed or a notice of

is individually liable for the entire tax in

and a disqualified person,

deficiency was issued.

connection with the act. But the

Payment of compensation (or

disqualified persons who are liable for

Do not complete Schedule B for any

payment or reimbursement of

the tax may prorate the payment among

year for which any of the above

expenses) by a private foundation to a

themselves. Enter in column (c) the tax

provisions apply to the undistributed

disqualified person,

to be paid by each disqualified person.

income.

Transfer to, or use by or for the

Carry the total amount in column (d)

benefit of, a disqualified person of the

for each self-dealer to Part II-A,

income or assets of a private

Schedule C—Initial Tax on

column (c).

foundation, and

Excess Business Holdings

Agreement by a private foundation to

Part III. Enter in column (a) the names

(Section 4943)

make any payment of money or other

of all foundation managers who took

property to a government official other

part in the acts of self-dealing listed in

General Instructions

than an agreement to employ or make a

Part I, and who knew that they were acts

Private foundations are generally not

grant to that individual for any period

of self-dealing (except for foundation

permitted to hold more than a 20%

after the end of government service if

managers whose participation was not

interest in an unrelated business

that individual will be ending

willful and was due to reasonable

enterprise. They may be subject to an

government service within a 90-day

cause).

excise tax on the amount of any excess

period.

If more than one foundation manager

holdings. For purposes of section 4943,

took part in the act of self-dealing,

Exceptions to self-dealing. Go to

donor advised funds and certain

knowing that it was such an act, and

supporting organizations are considered

participation was willful and not due to

irm_07-027-015.html#d0e272

for a

private foundations. For more

reasonable cause, each is individually

description of acts that are not

information on the applicability of

liable for the entire tax in connection

considered self-dealing.

Schedule C to such organizations, see

Instructions for Form 4720 (2015)

Instructions For Form 4720 (2015) Page 7

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