The excise tax on self-dealing is figured on the amount involved, which is the greater of the amount of money and the fair market value of other property given or the amount of money and fair market value of other property received. For payments made for services performed (to persons other than government officials), the amount involved is only the excess compensation paid by the private foundation. When the use of money or other property is involved, the amount involved is the greater of either the amount paid for the use or the fair market value of the use for the period for which the money or other property is used.
For a transaction that would not have been an act of self-dealing had the private foundation received fair market value, the amount involved is the excess of the fair market value of property transferred by the foundation over the amount received by the foundation, but only if the parties have made a good faith effort to determine fair market value. Ordinarily a good faith effort to determine fair market value will be considered made when:
The person making the valuation is not a disqualified person with respect to the foundation, is competent to make the valuation, and is not in a position, whether by stock ownership or otherwise, to receive an economic benefit from the value used, and
The valuation is made using a generally accepted method for valuing comparable property, stock, or securities in arm's length business transactions when valuation is a significant factor.
For example, if a corporation that is a disqualified person (as to the foundation) undertakes a recapitalization excepted from the self-dealing rule, but the foundation receives stock worth $95,000 in exchange for stock worth $100,000, the amount involved would be $5,000 if a good faith effort was made to value the stock.
Time for determining fair market value. The fair market value of property or the use thereof, as the case may be, for purposes of the initial taxes is the value as of the date the act of self-dealing occurred and for purposes of the additional taxes is the highest fair market value during the taxable period.