How do I calculate the minimum investment return on Form 990-PF?
727 views | Last modified 6/8/2020 6:17:05 AM EST | Added by ExpressTaxExempt Team

Applicable To
990-PF 990-N 990-EZ 990 8868 1120-POL

Minimum investment return is considered as the five percent of the combined fair market value of all the assets of the private foundation except the ones held for tax-exempt purposes. Any indebtedness incurred due to these assets will also be reduced from the fair market value before calculating the minimum investment return. The minimum investment return can also be considered as the distributable amount of a private foundation after making a few adjustments.
 
The fair market value is the fair price of a property in the market, where both the seller and buyer know all the important facts about the property. It is the current price at which the asset could be sold at the market without any negotiations, discounts, or any such reductions.
 
XYZ is a private foundation that owns assets worth $6000 that is not used for the exempt purposes of the foundation. XYZ had to take care of some administrative expenses and spent $1000 from the $6000 to cover these expenses. 5% of the remaining $5000 that are not used for the exempt purpose is the minimum investment return. The minimum investment return of XYZ is $1000.
 
Here's how you can calculate the minimum investment return of your private foundation in Form 990-PF using ExpressTaxExempt:

  1. Log into your ExpressTaxExempt account.
  2. On the dashboard, click on the "Start New Return" button.
  3. Select the "Tax Year" and "Form 990-PF" option on the list of Federal returns.
  4. Enter your organization details and click "Next".
  5. In the "Organization Tax Year" page, select the tax year calendar or fiscal, for which you want to file the information return. Once done, the subsequent steps will be to fill the actual parts of the form. 
  6. Under "Minimum Investment Return ", select "Fair Market Value of Assets not used Directly in Carrying Out Charitable, etc., Purposes".
  7. Enter the fair market value of the non-charitable use assets of the foundation and click "Next".
  8. Enter the value of the cash held for charitable activities and click "Next".
  9. The minimum investment return of your foundation for the taxable year will be calculated automatically.
  10. Click Next and follow the subsequent steps as prompted.
  11. Review the details, Pay and, click the Transmit button to transmit your return to the IRS.

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