Compute a private foundation's section 4942 distributable amount
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- Lay out the asset, indebtedness, and tax figures the file gives, in the order of section 4942(d) and (e). Do not fill a percentage the file does not support.
- What the lawyer must review
- IRC 4942(a) imposes an initial tax on the undistributed income of a private foundation equal to 30 percent of the amount remaining undistributed at the beginning of the second or any succeeding taxable year, where that income was not distributed before the first day of that year if that day falls within the taxable period. Subsection (b) imposes an additional tax equal to 100 percent of the amount remaining undistributed at the close of the taxable period, if an initial tax was imposed and any portion remains undistributed then. Subsection (d) defines the distributable amount as the minimum investment return plus the amounts described in subsection (f)(2)(C), reduced by the taxes imposed for the year under subtitle A and section 4940. Subsection (e)(1) defines the minimum investment return as 5 percent of the excess of the aggregate fair market value of all assets other than those used or held for use directly in carrying out the exempt purpose, over the acquisition indebtedness determined under section 514(c)(1). Section 514 was not opened. Securities for which market quotations are readily available are valued monthly. Other assets are valued at the times and in the manner the Secretary prescribes by regulations. Those regulations were not opened. A blockage reduction under subsection (e)(2)(B) may not exceed 10 percent of fair market value, and only if the foundation establishes the conditions in that subparagraph. The IRS page on taxes for failure to distribute income says a private foundation must spend annually a distributable amount, equal to the minimum investment return with certain adjustments, as qualifying distributions; may set aside funds for up to 60 months for certain major projects; may carry excess qualifying distributions forward for five tax years; and is subject to a 30 percent excise tax under section 4942 if it fails to pay out the distributable amount in a timely manner, charged for each year or partial year the deficiency remains uncorrected. The same page says an additional 100 percent tax is triggered if the foundation fails to make up the deficient distribution within 90 days of receiving notification from the IRS. Do not treat that 90-day sentence as the statute's definition of the taxable period. Subsection (f)(2)(C) and the qualifying-distribution and set-aside pages were not used as completed rules. This is a private-foundation rule. It is not a public-charity rule and not a donor-advised-fund rule. Do not copy a 4 percent rate or an $8,800 floor.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Do not begin AI assistance until the responsible lawyer has defined and confirmed its permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Review the original source set for relevant material absent from the output, including contrary evidence, qualifications and remaining gaps.
- Verify the applicable jurisdiction and the version of each relevant law, rule or instrument in force at the material time.
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.