Form 990 Schedule A Instructions (Page 16 of 19) in pdf

isn't considered an asset used for

instructions for Line 4, later) or set aside

a copy of the independent appraisal for

charitable purposes.

and taken as a distribution (see

its records. If a valuation is reasonable,

instructions for Line 5, Section D, later).

the organization may use it for the tax

Dual-use property. When property is

year for which the valuation is made and

used for both charitable and other

Line 1c. The fair market value of assets

for each of the four following tax years.

purposes, the property is considered

other than securities for which market

Any valuation of real estate by a

used entirely for charitable purposes if

quotations are readily available is

certified independent appraisal may be

95% or more of its total use is for that

determined annually except as

replaced during the 5-year period by a

purpose. If less than 95% of its total use

described later. The valuation may be

subsequent 5-year certified

is for charitable purposes, a reasonable

made by supporting organization

independent appraisal or by an annual

allocation must be made between

employees or by any other person even

valuation as described earlier. The most

charitable and non-charitable use.

if that person is a disqualified person. If

recent valuation should be used to

the IRS accepts the valuation, it is valid

Excluded property. Certain assets (in

compute the organization's minimum

only for the tax year for which it is made.

addition to exempt-use assets) are

asset amount.

A new valuation is required for the next

excluded entirely from the computation

tax year.

If the valuation is made according to

of the minimum asset amount. These

the above rules, the IRS will continue to

include charitable pledges and interests

Valuation date. An asset required to

accept it during the 5-year period for

in an estate or trust (created and funded

be valued annually may be valued as of

which it applies even if the actual fair

by another person) prior to distribution

any day in the supporting organization's

market value of the real estate changes

to the supporting organization.

tax year, provided the organization

during the period.

values the asset as of that date in all tax

Line 1a. Report on line 1a the average

years. However, a valuation of real

Line 1e. If the fair market value of any

monthly fair market value of securities

estate determined on a 5-year basis by

securities, real estate holdings, or other

(such as common and preferred stock,

a certified, independent appraisal

assets reported on lines 1a and 1c

bonds, and mutual fund shares) for

(discussed later) may be made as of

reflects a blockage discount,

which market quotations are readily

any day in the first tax year of the

marketability discount, or other

available. A supporting organization

organization to which the valuation

reduction from full fair market value

may use any reasonable method to

applies.

because of the size of the asset holding

make this determination if consistently

or any other factor, enter on line 1e the

used. For example, a value for a

Proration of value of assets held for

aggregate amount of the discounts

particular month might be determined

part of year or in a short tax year.

claimed. Provide an explanation in Part

by the closing price on the first or last

The value of an asset held less than a

VI that includes the following information

trading day of the month or an average

full tax year is prorated by multiplying

for each asset or group of assets

of the closing prices on the first and last

the value of the asset by a fraction, of

involved.

trading days of the month. Market

which the numerator is the number of

1. A description of the asset or

quotations are considered readily

days the organization held the asset

asset group (for example, 20,000

available if a security is any of the

during its tax year, and the denominator

shares of XYZ, Inc., common stock);

following.

is 365 (366 if the tax year includes

Listed on the New York or American

February 29). If the supporting

2. For securities, the percentage of

Stock Exchange or any city or regional

organization has a short tax year, the

the total issued and outstanding

exchange in which quotations appear

value of all assets is accordingly

securities of the same class that is

on a daily basis, including foreign

prorated.

represented by the organization's

securities listed on a recognized foreign

holding;

5-year valuation for real estate. A

national or regional exchange;

written, certified, and independent

3. The fair market value of the asset

Regularly traded in the national or

appraisal of the fair market value of any

or asset group before any claimed

regional over-the-counter market for

real estate, including any

blockage discount or other reduction;

which published quotations are

improvements, may be determined on a

4. The amount of the discount

available; or

5-year basis by a qualified person. The

claimed; and

Locally traded, for which quotations

qualified person may not be a

can be readily obtained from

5. An explanation of the reason for

disqualified person with respect to the

established brokerage firms.

the discount.

supporting organization or an employee

If securities are held in trust for, or on

of the supporting organization.

In the case of securities, there are

behalf of, a supporting organization by a

certain limitations on the size of the

Commonly accepted valuation

bank or other financial institution that

reduction in value that can be claimed.

methods must be used in making the

values those securities periodically

The organization may reduce the fair

real estate appraisal. A valuation based

using a computer pricing system, the

market value of securities only to the

on acceptable methods of valuing

organization may use that system to

extent that it can establish that the

property for federal estate tax purposes

determine the value of the securities.

securities could only be liquidated in a

will be considered acceptable.

The system must be acceptable to the

reasonable period of time at a price less

IRS for federal estate tax purposes.

The real estate appraisal must

than the fair market value because:

include a closing statement that, in the

Line 1b. Compute cash balances on a

The securities are such a large block

appraiser's opinion, the appraised

monthly basis by averaging the amount

that liquidation would depress the

assets were valued according to

of cash on hand on the first and last

market,

valuation principles regularly employed

days of each month. Include all cash

The securities are in a closely held

in making appraisals of such property,

balances and amounts, even if they may

corporation, or

using all reasonable valuation methods.

be used for charitable purposes (see

The supporting organization must keep

-16-

Instructions for Schedule A (Form 990 or 990-EZ)

Form 990 Schedule A Instructions Page 16

Related Articles

Related forms

Related Categories