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Taxable Period: Jeopardizing Investments

The taxable period begins with the date of the investment and ends on the earliest of:

  1. The date of removal from jeopardy, or
  2. The date a notice of deficiency for the initial tax is mailed, or
  3. The date the initial tax is assessed.

It may include more than one tax year of the foundation.

Example.  The Wilson Foundation has the calendar year as its tax year.  It makes a jeopardizing investment on November 28, 2015, and does not remove the investment from jeopardy until January 15, 2016.  The taxable period is from November 28, 2015, to January 15, 2016.  It therefore is liable for a total initial tax of 20 percent of the amount invested (ten percent for each tax year or part of a year in the taxable period).

NOTE: Please be aware that the initial tax rate imposed by section 4944(a) changes from 5% to 10% effective for tax years beginning after 08/17/2006 as given in P.L. 109-280, §1212(d)(1 ) as provided by the Pension Protection Act of 2006.


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Page Last Reviewed or Updated: 29-Jul-2016