Instructions For Form 4720 (2015) (Page 10 of 19) in pdf

foundation's excess holdings in the

holdings if line 1 is more than line 2 in

Supporting organizations. Only

enterprise were largest.

either column (a) or column (b). Do not

certain supporting organizations are

include in column (b) the value of any

subject to the excess business holdings

Line 1. Enter in column (a) the

voting stock included in column (a).

tax under section 4943. These include

percentage of voting stock the

(1) Type III supporting organizations that

A private foundation using the

foundation holds in the business

are not functionally integrated and (2)

section 4943(c)(2) rules has excess

enterprise.

Type II supporting organizations that

holdings if line 1 is more than line 2 in

If the foundation is using the rules or

accept any gift or contribution from a

column (a) or if the private foundation

principles for determining present

person who by himself or in connection

holds nonvoting stock and all

holdings under section 4943(c)(4)(A) or

with a related party controls the

disqualified persons together own more

(D) (or rules similar to that for donor

supported organization that the Type II

than 20% (or 35%, if applicable) of the

advised funds and certain supporting

supporting organization supports. (See

enterprise's voting stock, interest, etc. In

organizations), enter in column (b) the

the 2015 Instructions for Schedule A

the latter case, enter in column (c) the

percentage of value the foundation

(Form 990 or 990-EZ), Part I, question

value of all nonvoting stock the

holds in all outstanding shares of all

11, for help in determining the type of

foundation holds.

classes of stock.

your supporting organization.)

Line 4. Enter the value of excess

Do not include in either column (a) or

Readjustments, distributions, or

holdings disposed of under the 90-day

(b) stock treated as held by disqualified

changes in relative value of different

rule in Regulations section 53.4943-2(a)

persons:

classes of stock. See Regulations

(1)(ii). If other conditions preclude

Under section 4943(c)(6) or

section 53.4943-4(d)(10) for special

imposition of tax on excess business

Regulations sections 53.4943-6 and

rules whereby increases in the

holdings, include the value of the

53.4943-10(d), or

percentage of value of holdings in a

nontaxable amount on this line and

During the first phase if the first phase

corporation that result solely from

attach a statement.

is still in effect (see Regulations

changes in the relative values of

sections 53.4943-4(a), (b), and (c)).

different classes of stock will not result

Schedule D—Initial Taxes

Line 2. If the foundation is using the

in excess business holdings.

on Investments That

rules or principles for determining

See Regulations section

present holdings under section 4943(c)

Jeopardize Charitable

53.4943-6(d) for rules on treatment of

(4) (or rules similar to that for donor

Purpose (Section 4944)

increases in holdings due to

advised funds and certain supporting

readjustments, distributions, or

organizations), refer to that section and

General Instructions

redemptions.

Regulations section 53.4943-4(d) to

See Regulations section 53.4943-7

determine which entries to record in

Requirement. Complete Schedule D if

for special rules for readjustments

columns (a) and (b). Enter in column (a)

you answered “Yes,” to Form 990-PF,

involving grandfathered holdings.

the excess of the substituted combined

Part VII-B, question 4a or b, or Form

voting level over the disqualified person

5227, Part VI-B, question 78a or b.

Exceptions from selfdealing taxes

voting level. Enter in column (b) the

Report each investment separately.

on certain dispositions of excess

excess of the substituted combined

Paying tax and filing a Form 4720 are

business holdings. Section 101(I)(2)

value level over the disqualified person

required for each year or part of a year

(B) of the Tax Reform Act of 1969

value level.

in the taxable period that applies to the

provides for a limited exception from

investments that jeopardize the

self-dealing taxes for private

If the foundation is using the rules or

foundation's charitable purpose.

foundations that dispose of certain

principles for determining permitted

Generally, the taxable period begins

excess business holdings to disqualified

holdings under section 4943(c)(2), refer

with the date of the investment and

persons, as long as the sales price

to that section to determine which

ends with the date corrective action is

equals or is more than fair market value.

entries to record in column (a). Enter in

completed, a notice of deficiency is

column (a) the percentage, using the

The excess business holdings

mailed, or the initial tax is assessed,

general rule (section 4943(c)(2)(A)) or

involved are interests that are subject to

whichever comes first. Therefore, in

the 35% rule (see section 4943(c)(2)

the section 4941 transitional rules for

addition to investments made in 2015,

(B)), if applicable, of permitted holdings

May 26, 1969, holdings. These interests

include all investments subject to tax

the foundation may have in the

would also be subject to the excess

that were made before 2015 if those

enterprise's voting stock. If the

business holdings tax if they were not

investments were not removed from

foundation determines the permitted

reduced by the required amount.

jeopardy before 2015 and the initial tax

holdings under section 4943(c)(2)(B),

Specific Instructions

was not assessed before 2015.

attach a statement showing effective

control by a third party.

Complete columns (a) and (b) of

Taxable investments. An investment

Schedule C if sections 4943(c)(4),

to be taxed on this schedule is an

Line 3. Enter the value of any stock,

4943(c)(3) (using the principles of

investment by a private foundation that

interest, etc., in the business enterprise

4943(c)(4)), or 4943(c)(5) apply.

jeopardizes the carrying out of its

that the foundation is required to

exempt purposes (for example, if it is

dispose of so the foundation's holdings

Complete column (a) and column (c)

determined that the foundation

in the enterprise are permitted. See

(if applicable) if sections 4943(c)(2) or

managers, in making the investment,

section 4943 and related regulations.

4943(c)(3) (using the principles of

did not exercise ordinary business care

A private foundation using the

4943(c)(2)) apply.

and prudence, under prevailing facts

section 4943(c)(4) rules, or a donor

and circumstances, in providing for the

Complete Schedule C for that day

advised fund or supporting organization

long- and short-term financial needs of

during the tax year when the

using rules similar to that, has excess

Instructions for Form 4720 (2015)

Instructions For Form 4720 (2015) Page 10

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