[Code of Federal Regulations]
[Title 26, Volume 13]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR]

[Page 229-231]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Procedure and Administration--Table of Contents
 
Sec.  1.6043-3  Return regarding liquidation, dissolution, termination, 

or substantial contraction of organizations exempt from taxation under 
section 501(a).

    (a) In general--(1) Requirement to provide information. Except as 
provided in paragraph (b) of this section, for taxable years beginning 
after December 31, 1969, every organization which for any of its last 5 
taxable years preceding any liquidation, dissolution, termination, or 
substantial contraction of the organization was exempt from taxation 
under section 501(a) shall provide the information will respect to such 
liquidation, dissolution, termination, or substantial contraction 
required by the instructions accompanying the organization's annual 
return of information. The information required by this section shall be 
provided with, and at the time prescribed for filing, the organization's 
annual return of information for the period during which any 
liquidation, dissolution (or the adopting of a resolution or plan for 
the dissolution or liquidation in whole or part), termination or 
substantial contraction occurred with respect to the organization. An 
organization which is no longer exempt from taxation under section 
501(a) shall use the annual return of information it would have been 
required to file when the organization was exempt.
    (2) Transitional rule. In the case of an annual return of 
information of an organization which was filed before September 11, 
1978, if the organization had failed to provide the information with 
such return in accordance with paragraph (a)(1) of this section, the 
organization may comply with this section by providing the information 
with the organization's first annual return of information filed after 
such date.
    (b) Exceptions. The following organizations are not required to 
provide the information under paragraph (a) of this section:
    (1) Churches, their integrated auxiliaries, or conventions or 
associations of churches;
    (2) Any organization which is not a private foundation (as defined 
in section 509(a)) and the gross receipts of which in each taxable year 
are normally not more than $5,000;
    (3) Any organization which has terminated its private foundation 
status under section 507(b)(1)(B) with respect to a liquidation, 
dissolution, termination, or substantial contraction which is in 
connection with the termination under section 507(b)(1)(B);
    (4) Any organization described in section 401(a) if the employer who 
established such organization files a return which provides the 
information under paragraph (a) of this section;
    (5) Any organization described in section 501(c)(1) and any 
corporation described in section 501(c)(2) which holds title to property 
for such 501(c)(1) organizations;
    (6) Any organization described in section 501(c)(14)(A) subject to a 
group exemption letter issued to a state regulatory body; and
    (7) Any subordinate unit of a central organization (other than a 
private foundation) which established its exempt status under the group 
ruling procedure of regulations Sec.  601.201 (n)(7), if the central or 
parent organization files an annual information return for the group in 
accordance withSec.  1.6033-2(d); and
    (8) Any organization no longer exempt from taxation under section 
501(a) and which during the period of its exemption under such section 
was neither described in section 501(c)(3) nor a corporation described 
in section 501(c)(2) which held title to property

[[Page 230]]

for an organization described in section 501(c)(3).

The Commissioner may relieve any organization or class or organizations 
from filing the return required by section 6043(b) of this section, 
where it is determined that such information is not necessary for the 
efficient administration of the internal revenue laws.
    (c) Penalties. For provisions relating to the penalty provided for 
failure to furnish any information required by this section, see section 
6652(d) and the regulations thereunder.
    (d) Definitions. (1)(i) The term ``substantial contraction'', as 
used in this section, shall include any partial liquidation or any other 
significant disposition of assets, other than transfers for full and 
adequate consideration or distributions out of current income. For 
purposes of this subparagraph, the term ``significant disposition of 
assets'' shall not include any disposition for a taxable year where the 
aggregate of--
    (A) The dispositions for the taxable year and
    (B) Where any disposition for the taxable year is part of a series 
of related dispositions made during such prior taxable years, the total 
of the related dispositions made during prior taxable years, is less 
than 25 percent of the fair market value of the net assets of the 
organization at the beginning of the taxable year (in the case of (A) of 
this subdivision) or at the beginning of the first taxable year in which 
any of the series of related dispositions was made (in the case of (B) 
of this subdivision). A ``significant disposition of assets'' may result 
from the transfer of assets to a single organization or to several 
organizations, and it may occur in a single taxable year (as in (A) of 
this subdivision) or over the course of two or more taxable years (as in 
(B) of this subdivision). The determination whether a significant 
disposition has occurred through a series of related dispositions 
(within the meaning of (B) of this subdivision) will be determined from 
all the facts and circumstances of the particular case. Ordinarily, a 
distribution described in section 170(b)(1)(D)(ii) shall not be taken 
into account as a significant disposition of assets within the meaning 
of this subparagraph.
    (ii) The provisions of this subparagraph may be illustrated by the 
following examples:
    Example (1). M, an organization described is section 501(c)(4), is 
on the calendar year basis. It has net assets worth $100,000 as of 
January 1, 1971. In 1971, in addition to distributions out of current 
income, M transfers $10,000 to N, $10,000 to O, and $10,000 to P. Such 
dispositions to N, O, and P are not distributions described in section 
170(b)(1)(E)(ii). N, O, and P are all organizations described in section 
501(c)(4). Under subdivision (i)(a) of this subparagraph, M has made a 
significant disposition of its assets in 1971 since M has disposed of 
more than 25 percent of its net assets (with respect to the fair market 
value of such assets as of January 1, 1971). Thus. M is subject to the 
provisions of section 6043(b) and this section for the year 1971.
    Example (2). U, a tax-exempt private foundation on the calendar year 
basis, has net assets worth $100,000 as of January 1, 1971. As part of a 
series of related dispositions in 1971 and 1972. U transfers in 1971, in 
addition to distributions out of current income, $10,000 to private 
foundation X and $10,000 to private foundation Y, and in 1972, in 
addition to distributions out of current income, U transfers $10,000 to 
private foundation Z. Such dispositions to X, Y, and Z are not 
distributions described in section 170(b)(1)(E)(ii). Under subdivision 
(i) of this subparagraph, U is treated as having made a series of 
related dispositions in 1971 and 1972. The aggregate of the 1972 
disposition (under subdivision (i)(a)of this subparagraph) and the 
series of related dispositions (under subdivision (i)(b) of this 
subparagraph) is $30,000, which is more than 25 percent of the fair 
market value of U's net assets as of the beginning of 1971 ($100,000), 
the first year in which any such disposition was made. Thus, U has made 
a significant disposition of its assets and is subject to the provisions 
of section 6043(b) and this section for the year 1972.
    Example (3). Assume in Example (1) that in 1973 M makes a $5,000 
disposition related to the 1971 disposition. Under subdivision (i)(B) of 
this subparagraph M is treated as having made a series of related 
dispositions in 1971 and 1973. The aggregate of the 1971 disposition 
under subdivision (i)(A) of this subparagraph and the 1973 related 
disposition under subdivision (i)(B) of this subparagraph is $35,000, 
which is more than 25 percent of the fair market value of M's net assets 
as of the beginning of 1971, the first year in which any disposition was 
made. Thus M has made a significant disposition of its assets and is 
subject to the provisions of section 6043(b) and this section for the 
year 1973.


[[Page 231]]


    (2) For the definition of the term ``normally'' as used in paragraph 
(b)(2) of this section, see Sec.  1.6033-2(g)(3).
    (3) For examples of the term ``integrated auxiliaries'' as used in 
paragraph (b)(1) of this section, see Sec.  1.6033-2(g)(1)(i)(a).

[T.D. 7563, 43 FR 40221, Sept. 11, 1978]