Instructions For Form 4720 - 2016 (Page 10 of 19) in pdf

by private foundations on May 26, 1969,

(B) of the Tax Reform Act of 1969

value level over the disqualified person

will be applied to determine if donor

provides for a limited exception from

value level.

advised funds or certain supporting

self-dealing taxes for private

If the foundation is using the rules or

organizations with interests as of August

foundations that dispose of certain

principles for determining permitted

17, 2006, have any excess business

excess business holdings to disqualified

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

holdings. However, the date of August

persons, as long as the sales price

to that section to determine which

17, 2006, will be substituted for May 26,

equals or is more than fair market value.

entries to record in column (a). Enter in

1969.

The excess business holdings

column (a) the percentage, using the

involved are interests that are subject to

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

Donor advised fund. In general, a

the section 4941 transitional rules for

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

donor advised fund is a fund or account

May 26, 1969, holdings. These interests

(B)), if applicable, of permitted holdings

separately identified by reference to

would also be subject to the excess

the foundation may have in the

contributions of a donor or donors that is

business holdings tax if they were not

enterprise's voting stock. If the

owned and controlled by a sponsoring

reduced by the required amount.

foundation determines the permitted

organization and for which the donor

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

has or expects to have advisory

Specific Instructions

attach a statement showing effective

privileges concerning the distribution or

Complete columns (a) and (b) of

control by a third party.

investment of the funds. See

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

Schedule K for further details.

Line 3. Enter the value of any stock,

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

interest, etc., in the business enterprise

Sponsoring organization. A

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

that the foundation is required to

sponsoring organization is any section

dispose of so the foundation's holdings

170(c) organization other than

Complete column (a) and column (c)

in the enterprise are permitted. See

governmental entities (described in

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

section 4943 and related regulations.

section 170(c)(1) and (2)(A)) that isn't a

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

private foundation as defined in section

4943(c)(2)) apply.

A private foundation using the

509(a)(3) that maintains one or more

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

Complete Schedule C for that day

donor advised funds.

advised fund or supporting organization

during the tax year when the

using rules similar to that, has excess

Supporting organizations. Only

foundation's excess holdings in the

holdings if line 1 is more than line 2 in

certain supporting organizations are

enterprise were largest.

either column (a) or column (b). Don't

subject to the excess business holdings

include in column (b) the value of any

Line 1. Enter in column (a) the

tax under section 4943. These include

voting stock included in column (a).

percentage of voting stock the

(1) Type III supporting organizations that

foundation holds in the business

A private foundation using the

aren't functionally integrated and (2)

enterprise.

section 4943(c)(2) rules has excess

Type II supporting organizations that

holdings if line 1 is more than line 2 in

accept any gift or contribution from a

If the foundation is using the rules or

column (a) or if the private foundation

person who by himself or in connection

principles for determining present

holds nonvoting stock and all

with a related party controls the

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

disqualified persons together own more

supported organization that the Type II

(D) (or rules similar to that for donor

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

supporting organization supports. (See

advised funds and certain supporting

enterprise's voting stock, interest, etc. In

the 2016 Instructions for Schedule A

organizations), enter in column (b) the

the latter case, enter in column (c) the

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

percentage of value the foundation

value of all nonvoting stock the

11, for help in determining the type of

holds in all outstanding shares of all

foundation holds.

your supporting organization.)

classes of stock.

Line 4. Enter the value of excess

Don't 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 won't result in

excess business holdings.

Schedule D—Initial Taxes

Line 2. If the foundation is using the

See Regulations section

rules or principles for determining

on Investments That

53.4943-6(d) for rules on treatment of

present holdings under section 4943(c)

Jeopardize Charitable

increases in holdings due to

(4) (or rules similar to that for donor

Purpose (Section 4944)

readjustments, distributions, or

advised funds and certain supporting

redemptions.

organizations), refer to that section and

General Instructions

Regulations section 53.4943-4(d) to

See Regulations section 53.4943-7

determine which entries to record in

for special rules for readjustments

Requirement. Complete Schedule D if

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

involving grandfathered holdings.

you answered “Yes,” to Form 990-PF,

the excess of the substituted combined

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

Exceptions from selfdealing taxes

voting level over the disqualified person

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

on certain dispositions of excess

voting level. Enter in column (b) the

Report each investment separately.

business holdings. Section 101(I)(2)

excess of the substituted combined

Paying tax and filing a Form 4720 are

Instructions for Form 4720 (2016)

Instructions For Form 4720 - 2016 Page 10

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