Instructions For Form 4720 (2015) (Page 15 of 19) in pdf

8886-T, Disclosure by Tax-Exempt

because of the donor's status as a

Schedule K—Taxes on

Entity Regarding Prohibited Tax Shelter

donor.

Taxable Distributions of

Transaction, for more information.

Exception. A donor advised fund

Sponsoring Organizations

Allocation of net income and pro

does not include:

ceeds to a tax year. The net income

Maintaining Donor

1. A fund or account that makes

and proceeds attributable to a

Advised Funds (Section

distributions only to a single identified

prohibited tax shelter transaction must

organization or governmental entity, or

4966)

be allocated to a particular tax year in a

2. Any fund or account for a person

manner consistent with the entity's

General Instructions

described in 3 under Donor advised

established method of accounting for

fund (DAF) that gives advice about

federal income tax purposes. If an entity

Requirement. Complete Schedule K if

which individuals receive grants for

has not established a method of

you answered “Yes,” to question 9a in

travel, study, or similar purposes, if:

accounting for federal income tax

Part V of Form 990, or if you are a fund

a. The person's advisory privileges

purposes, the entity must use the cash

manager of a sponsoring organization

are performed exclusively by such

receipts and disbursements method to

who agreed to the making of a taxable

person in their capacity as a committee

determine the amount and timing of net

distribution knowing that it was a taxable

member of which all the committee

income and proceeds attributable to a

distribution. Report each taxable

members are appointed by the

prohibited tax shelter transaction.

distribution separately. These terms are

sponsoring organization,

discussed below.

If an entity has an established

b. No combination of persons with

method of accounting other than the

Taxable distribution. A taxable

advisory privileges, described in 3

cash method, the entity may use the

distribution is any distribution from a

under DAF, or persons related to those

cash method to determine the amount

donor advised fund to any natural

in 3 under DAF, directly or indirectly

of the net income and proceeds

person or to any other person if:

control the committee, and

attributable to a prohibited tax shelter

1. The distribution is for any

transaction.

c. All grants from the fund or

purpose other than one specified in

account are awarded on an objective

Specific Instructions

section 170(c)(2)(B), or

and nondiscriminatory basis according

2. The sponsoring organization

Part I. Complete this part for each

to a procedure approved in advance by

maintaining the donor advised fund

transaction if during the tax year, the

the board of directors of the sponsoring

does not exercise expenditure

entity received proceeds from or has net

organization. The procedure must be

responsibility with respect to such

income attributable to a PTST.

designed to ensure that all grants meet

distribution in accordance with section

the requirements of section 4945(g)(1),

Figure the tax for each transaction as

4945(h).

(2), or (3).

follows:

If column (e) was answered “Yes,”

However, a taxable distribution does

Tax on sponsoring organization. A

then enter the larger of the column (f) or

not include a distribution from a donor

tax of 20% of the amount of each

column (g) amount in column (h).

advised fund to:

taxable distribution is imposed on the

If column (e) was answered “No,”

1. Any organization described in

sponsoring organization.

then multiply the larger of the amount in

section 170(b)(1)(A) (other than a

column (f) or column (g) by 35% (.35)

Tax on fund manager. If a tax is

disqualified supporting organization),

and enter the result in column (h).

imposed on a taxable distribution of the

2. The sponsoring organization of

sponsoring organization, a tax of 5% of

After the tax has been figured for all

such donor advised fund, or

the distribution will be imposed on any

PTSTs entered on Schedule J, then

3. Any other donor advised fund.

fund manager who agreed to the

total column (h) and enter the amount

distribution knowing that it was a taxable

on the Total line and on line 9 of Part I.

Sponsoring organization. A

distribution. Any fund manager who took

sponsoring organization is a section

Part II. Enter in column (a) the names

part in the distribution and is liable for

170(c) organization that is not a

of all entity managers who approved the

the tax must pay the tax. The maximum

government organization (as referred to

entity as (or otherwise caused the entity

amount of tax on all fund managers for

in section 170(c)(1) and (2)(A)) or a

to be) a party to a PTST at any time

any one taxable distribution is $10,000.

private foundation and maintains one or

during the tax year and who knew or

If more than one fund manager is liable

more donor advised funds.

had reason to know that the transaction

for tax on a taxable distribution, all such

is a PTST.

managers are jointly and severally liable

Donor advised fund. A donor advised

for the tax.

Carry the total amount in column (d)

fund is a fund or account:

for each manager to Part II-A, column

1. Which is separately identified by

Specific Instructions

(i).

reference to contributions of a donor or

Part I. Complete this part for all taxable

donors,

distributions.

2. Which is owned and controlled by

Part II. Enter in column (a) the names

a sponsoring organization, and

of all fund managers who agreed to

3. For which the donor (or any

make the taxable distribution. If more

person appointed or designated by the

than one fund manager is listed in

donor) has or expects to have advisory

column (a) for one distribution, each is

privileges concerning the distribution or

individually liable for the entire tax in

investment of the funds held in the

connection with that distribution.

donor advised funds or accounts

Instructions for Form 4720 (2015)

Instructions For Form 4720 (2015) Page 15

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