[Code of Federal Regulations]
[Title 26, Volume 7]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.507-7]

[Page 91-92]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.507-7  Value of assets.

    (a) In general. For purposes of section 507(c), the value of the net 
assets shall be determined at whichever time such value is higher:
    (1) The first day on which action is taken by the organization which 
culminates in its ceasing to be a private foundation, or
    (2) The date on which it ceases to be a private foundation.
    (b) Valuation dates. (1) In the case of a termination under section 
507(a)(1), the date referred to in paragraph (a)(1) of this section 
shall be the date on which the terminating foundation gives the 
notification described in section 507(a)(1).
    (2) In the case of a termination under section 507(a)(2), the date 
referred to in paragraph (a)(1) of this section shall be the date of 
occurrence of the willful and flagrant act (or failure to act) or the 
first of the series of willful repeated acts (or failures to act) giving 
rise to liability for tax under chapter 42 and the imposition of tax 
under section 507(a)(2).

[[Page 92]]

    (c) Fair market value. For purposes of this section, fair market 
value shall be determined pursuant to the provisions of Sec. 
53.4942(a)-2(c)(4) of this chapter.
    (d) Net assets. For purposes of section 507 and the regulations 
thereunder, the term net assets shall mean the gross assets of a private 
foundation reduced by all liabilities of the foundation, including 
appropriate estimated and contingent liabilities. Thus, a determination 
of net assets may reflect reductions for any liability or contingent 
liability for tax imposed upon the private foundation under chapter 42 
with respect to acts or failures to act prior to termination, for any 
liability or contingent liability for failures to correct such acts or 
failures to act, or for any liability or estimated or contingent 
liability with respect to expenses associated with winding up the 
organization. If a private foundation's determination of net assets 
reflects any reduction for any estimated or contingent liability, such 
private foundation must establish, to the satisfaction of the 
Commissioner, the reasonableness of such reduction. If the amount of net 
assets reflects a reduction for any estimated or contingent liability, 
at the earlier of the final determination of the contingency or the 
termination of a reasonable time, any excess of the amount by which the 
gross assets was reduced over the amount of the liability shall be 
treated in the same manner as if such excess had been considered part of 
the net assets.

[T.D. 7233, 37 FR 28161, Dec. 21, 1972]