Instructions For Form 4720 - 2016 (Page 5 of 19) in pdf

The instructions for Schedules A

Request for Abatement, instead of Form

An investment is considered to be

through M describe acts or transactions

4720.

removed from jeopardy when the

subject to tax under Chapter 42. The

investment is sold or otherwise

instructions for Schedules A through M

disposed of, and the proceeds of such

Specific Instructions for

also provide links to helpful information

sale or other disposition are not

Page 1

available on , including

investments that jeopardize the carrying

information about exceptions that would

out of the foundation's exempt purpose.

Question B. To avoid additional taxes

eliminate any tax liability. Don't

5. Section 4945 (Schedule E)

and penalties under sections 4941

complete Schedules A and E if

through 4945, 4955, and 4958, and in

a. Recovering part or all of the

exceptions apply to all the acts or

some cases further initial taxes, a

expenditure to the extent recovery is

transactions. In general, question A on

possible, and where full recovery isn't

foundation, organization, disqualified

page 1 and Schedules A, B, C, D, and E

possible, such additional corrective

person, or manager must correct the

don't apply to public charities. However,

action as is prescribed by regulations,

taxable event within the correction

Schedule C does apply to some public

period. The taxable event is the act,

charities including donor advised funds

failure to act, or transaction that resulted

b. Obtaining or making the report in

and certain supporting organizations

in the liability for initial taxes under these

question for a case that fails to comply

that are treated as private foundations

provisions.

with section 4945(h)(2) or (3)

for purposes of section 4943. See the

Generally, the correction period

(expenditure responsibility).

instructions for Schedule C for a

begins on the date the event occurs and

description of the public charities to

6. Section 4955 (Schedule F)

ends 90 days after the mailing date of a

which section 4943 applies.

Recovering part or all of the expenditure

notice of deficiency, under section

to the extent recovery is possible,

Before completing Schedule C,

6212, in connection with the second tier

establishment of safeguards to prevent

determine whether the organization or

tax imposed on that taxable event. That

future political expenditures, and where

donor advised fund has excess holdings

time is extended by:

full recovery isn't possible, such

in any business enterprise. If the

Any period in which a deficiency can't

additional corrective action as is

organization or donor advised fund has

be assessed under section 6213(a)

prescribed by the regulations.

holdings subject to the tax on excess

because a petition to the Tax Court for

7. Section 4958 (Schedule I)

business holdings, complete

redetermination of the deficiency is

Undoing the excess benefit to the extent

Schedule C for each enterprise.

pending, not extended by any

possible and taking any additional

supplemental proceeding by the Tax

measures necessary to place the

Before completing Schedule D,

Court under section 4961(b), regarding

organization in a financial position not

determine whether the investment was

whether correction was made, and

worse than that in which it would be if

program related. If not, complete

Any other period the IRS determines

the disqualified person had been

Schedule D for each investment for

is reasonable and necessary to correct

dealing under the highest fiduciary

which you answered “Yes,” to Form

the taxable event.

standards.

990-PF, Part VII-B, question 4a or b, or

The taxable event will be treated as

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

If, when the return is filed, the

occurring:

foundation, entity, managers,

For the tax on failure to distribute

Amended Return

self-dealers, disqualified persons,

income, on the first day of the tax year

To correct a previously filed Form 4720

donors, donor advisors, or related

for which there was a failure to distribute

(including the reporting of additional

persons have corrected any acts or

income,

excise taxes discovered after the

transactions resulting in liability for tax

For the tax on excess business

original Form 4720 filing), use the same

under Chapter 42, answer “Yes,” to

holdings, on the first day on which there

year form as the form you are

question B and give the following

were excess business holdings, or

correcting, and:

information separately for each

In any other case, on the date the

Write “Amended Return,” at the top of

correction:

event occurred.

page 1.

Schedule and item number of the act

Generally, the term “correction” has

Complete the entire return (not just

or transaction that has been corrected,

the following meanings.

the part that changed) following the form

A description of the act or transaction

1. Section 4941 (Schedule A)

and instructions for the amended year.

that resulted in the tax,

Undoing the transaction to the extent

Include a statement that identifies the

A detailed description of the

possible, but in any case placing the

lines and amounts being changed and

correction made,

private foundation in a financial position

the reason for each change.

The amount of any political

not worse than that in which it would be

Write the entity's name and EIN at the

expenditure recovered,

if the disqualified person were dealing

top of each page of the statement.

Description of safeguards to prevent

under the highest fiduciary standards.

future political expenditures, and

If the amended return is claiming a

2. Section 4942 (Schedule B)

The date of correction.

refund or requesting an abatement,

Making sufficient qualifying distributions

For any acts or transactions the

write “Claim for Refund” or “Request for

to compensate for deficient qualifying

foundation, entity, managers,

Abatement,” whichever is applicable,

distributions for a prior tax year.

self-dealers, disqualified persons,

near the top of the statement discussed

donors, donor advisors, or related

3. Section 4943 (Schedule C)

above.

persons have not corrected, give the

Action that results in the foundation no

following information separately for

longer having excess business holdings

Note. If you are claiming a refund or

each act:

in a business enterprise.

requesting an abatement, you may use

4. Section 4944 (Schedule D)

Form 843, Claim for Refund and

Instructions for Form 4720 (2016)

Instructions For Form 4720 - 2016 Page 5

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