Schedule N is used for Form 990 filings, as well as Form 990-EZ filings, to provide information relating to going out of existence or disposing of more than 25 percent of an organization's net assets.
You will need to complete Part I if your organization has been fully liquidated, dissolved, or terminated during the tax year. You are required to provide information describing the assets distributed or transaction expenses paid (i.e., payments to a professional for services rendered to assist in the transaction or in the winding down). You must also provide the fair market value (FMV) of assets distributed and the method for determining the FMV. Information about the recipient is also required.
In addition, you are required to attach a certified copy of the articles of dissolution or merger, resolutions, and plans of liquidation or merger. If you received a ruling that the organization is no longer exempt under Sec. 501(a), that ruling must be attached. You must also attach any private letter ruling from the IRS approving the organization's proposed dissolution or liquidation if you received one.
Schedule N requires the reporting of partial dispositions in some cases. If more than 25 percent of the organization's assets are disposed (termed a significant disposition), Part II must be completed. A significant disposition includes the sale, exchange, disposition, or other transfer of more than 25 percent of the FMV of the organization's assets during the year.
It's important to note that a significant disposition can include a contraction of assets resulting from a grant or charitable contribution of assets to another 501(c)(3) organization. For example, if your organization has net assets of $1 million FMV at the beginning of the year, and it contributed $300,000 of its assets to another charity to support that charity's program, your organization would report a significant disposition. However, grants or other assistance made in the ordinary course of the organization’s exempt activities to accomplish the organization’s exempt purposes is not a significant disposition of net assets. For example, the regular charitable distributions of a federated fundraising organization such as the United Way are not significant dispositions.
A decrease in the value of net assets due to market fluctuation in the value of assets held by the organization is not a significant disposition.