Instructions For Form 4720 - 2016 (Page 15 of 19) in pdf

receipts and disbursements method to

1. The distribution is for any

Managers of tax favored

determine the amount and timing of net

purpose other than one specified in

retirement plans, individual

TIP

income and proceeds attributable to a

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

retirement arrangements, and

prohibited tax shelter transaction.

2. The sponsoring organization

savings arrangements described in

If an entity has an established

maintaining the donor advised fund

sections 401(a), 403(a), 403(b), 529,

method of accounting other than the

doesn't exercise expenditure

457(b), 408(a), 220(d), 408(b), 530, or

cash method, the entity may use the

responsibility with respect to such

223(d) must report and pay tax due

cash method to determine the amount

distribution in accordance with section

under section 4965(a)(2) on Form 5330.

of the net income and proceeds

4945(h).

attributable to a prohibited tax shelter

Prohibited tax shelter transaction. In

However, a taxable distribution

transaction.

general, a prohibited tax shelter

doesn't include a distribution from a

transaction means any listed transaction

Specific Instructions

donor advised fund to:

(including a subsequently listed

1. Any organization described in

transaction) and any prohibited

Part I. Complete this part for each

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

reportable transaction.

transaction if during the tax year, the

disqualified supporting organization),

entity received proceeds from or has net

Listed transaction. A listed

income attributable to a PTST.

2. The sponsoring organization of

transaction includes any transaction that

such donor advised fund, or

Figure the tax for each transaction as

is the same as or substantially similar to

follows:

3. Any other donor advised fund.

one of the types of transactions that the

If column (e) was answered “Yes,”

IRS has determined to be a tax

Sponsoring organization. A

then enter the larger of the column (f) or

avoidance transaction. These

sponsoring organization is a section

column (g) amount in column (h).

transactions are identified by notice,

170(c) organization that isn't a

If column (e) was answered “No,”

regulation, or other form of published

government organization (as referred to

then multiply the larger of the amount in

guidance as a listed transaction. For

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

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

existing guidance, see Notice 2009-59,

private foundation and maintains one or

and enter the result in column (h).

2009-31 I.R.B. 170.

more donor advised funds.

After the tax has been figured for all

For updates to this list, go to the IRS

PTSTs entered on Schedule J, then

Donor advised fund. A donor advised

website at

total column (h) and enter the amount

fund is a fund or account:

corporations

and click on “Abusive Tax

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

Shelters and Transactions.” The listed

1. Which is separately identified by

transactions in the above notices and

reference to contributions of a donor or

Part II. Enter in column (a) the names

rulings will also be periodically updated

donors,

of all entity managers who approved the

in future issues of the Internal Revenue

entity as (or otherwise caused the entity

2. Which is owned and controlled by

Bulletin.

to be) a party to a PTST at any time

a sponsoring organization, and

during the tax year and who knew or

Subsequently listed transaction.

3. For which the donor (or any

had reason to know that the transaction

A subsequently listed transaction is a

person appointed or designated by the

is a PTST.

transaction that is identified in published

donor) has or expects to have advisory

guidance as a listed transaction after

Carry the total amount in column (d)

privileges concerning the distribution or

the entity has entered into the

for each manager to Part II-A, column

investment of the funds held in the

transaction and that was not a

(i).

donor advised funds or accounts

confidential transaction or transaction

because of the donor's status as a

with contractual protection at the time

donor.

Schedule K—Taxes on

the entity entered into the transaction.

Taxable Distributions of

Exception. A donor advised fund

Prohibited reportable transaction. A

doesn't include:

Sponsoring Organizations

prohibited reportable transaction is any

1. A fund or account that makes

Maintaining Donor

confidential transaction or any

distributions only to a single identified

transaction with contractual protection

Advised Funds (Section

organization or governmental entity, or

that is a reportable transaction. See

4966)

2. Any fund or account for a person

Regulations sections 1.6011-4(b)(3)

described in 3 under Donor advised

and (4), and the Instructions for Form

General Instructions

fund (DAF) that gives advice about

8886-T, Disclosure by Tax-Exempt

which individuals receive grants for

Entity Regarding Prohibited Tax Shelter

Requirement. Complete Schedule K if

travel, study, or similar purposes, if:

Transaction, for more information.

you answered “Yes,” to question 9a in

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

a. The person's advisory privileges

Allocation of net income and pro

manager of a sponsoring organization

are performed exclusively by such

ceeds to a tax year. The net income

who agreed to the making of a taxable

person in their capacity as a committee

and proceeds attributable to a

distribution knowing that it was a taxable

member of which all the committee

prohibited tax shelter transaction must

distribution. Report each taxable

members are appointed by the

be allocated to a particular tax year in a

distribution separately. These terms are

sponsoring organization,

manner consistent with the entity's

discussed below.

b. No combination of persons with

established method of accounting for

advisory privileges, described in 3

federal income tax purposes. If an entity

Taxable distribution. A taxable

under DAF, or persons related to those

hasn't established a method of

distribution is any distribution from a

in 3 under DAF, directly or indirectly

accounting for federal income tax

donor advised fund to any natural

control the committee, and

purposes, the entity must use the cash

person or to any other person if:

Instructions for Form 4720 (2016)

Instructions For Form 4720 - 2016 Page 15

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