D. Capital Gains and Losses

(1) For purposes of Section 4940, in determining capital gain net income:

a. Any gain or loss from the sale or other disposition of property isn’t taken into

account to the extent that gain or loss is taken into account for purposes of computing the tax imposed by Section 511.

b. The basis for determining gain in the case of property held by the private

foundation on December 31, 1969, and continuously thereafter to the date of its disposition is deemed to be not less than the fair market value of such property on December 31, 1969.

c. Losses from sales or other dispositions of property are allowed only to the

extent of gains from such sales or other dispositions, and there are no capital loss carryovers or carrybacks.

d. Except to the extent provided by regulation, under rules similar to the rules of

Section 1031 (including the exception under subsection (a)(2) thereof), no gain or loss shall be taken into account with respect to any portion of property used for a period of not less than 1 year for a purpose or function constituting the basis of the private foundation’s exemption if the entire property is exchanged immediately following such period solely for property of like kind which is to be used primarily for a purpose or function constituting the basis for such foundation’s exemption. See Section 4940(c)(4).

Note: The Treas. Regs. under Section 4940 have not been revised to reflect the changes made by PPA 2006.