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Exam 23: Exempt Entities

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Question 1

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Which of the following statements regarding the unrelated business income tax is not correct?

A) Unrelated business income is income from activities not related to the exempt purpose of the organization.
B) The unrelated business income tax is levied because the exempt organization is engaging in substantial commercial activities.
C) If the unrelated business income tax were not levied, nonexempt organizations would be placed at a substantial disadvantage when trying to compete with the exempt organization.
D) The tax rate that is applied to unrelated business taxable income is the highest corporate tax rate.
E) All of the above statements are correct.

F) A) and C)
G) B) and E)

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Question 2

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Well,Inc.,a private foundation,makes a speculative investment of $400,000 that puts the foundation assets at risk.Calculate the tax on jeopardizing investments.Assume that corrective action is taken so that the additional tax does not apply.

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The initial tax on the private...

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Question 3

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Match the following statements. a.May be subject to some Federal income taxation and classification may adversely affect amount of charitable contributions received. b.Tax imposed for engaging in transactions with disqualified persons. c.Tax imposed for making investments that are too risky. d.Tax imposed on investments that enable a private foundation to control unrelated for-profit businesses. -Tax on excess business holdings

Match the following statements. a.Distribution of such items is not considered an unrelated trade or business if they are "low-cost items". b.Is considered an unrelated trade or business if the amount received is contingent upon the level of attendance at one or more events c.Is considered an unrelated trade or business if legally it can be conducted by commercial (for-profit) entities. d.A trade or business that consists of either renting or exchanging these with another exempt organization is not an unrelated trade or business. -Bingo games

Which of the following statements regarding low-cost articles is correct? Which of the following statements regarding low-cost articles is correct?

A § 501(c) (3) organization that otherwise would be classified as a private foundation can avoid such classification if it satisfies:

Match the following statements. a.Exempt from tax on unrelated business. b.Inappropriate definition. c.Exempt organization may be subject to the tax on unrelated business income. d.Annual information return of an exempt organization that is required to file a return and which is not a private foundation. e.Appropriate definition. f.Annual information return of a private foundation. -The trade or business consists of selling merchandise,and substantially all of the merchandise has been received as gifts or contributions.

Which of the following taxes can be imposed on private foundations? Which of the following taxes can be imposed on private foundations?

The tax consequences to a donor of making a charitable contribution to an exempt organization classified as a private foundation may be less favorable than the tax consequences to a donor of making a charitable contribution to an exempt organization that is a public charity.

One of the requirements for an exempt organization being classified as an unrelated trade or business is that the trade or business is not substantially related to the exempt purpose of the organization.How can an exempt organization avoid satisfying this requirement?

Revenue generated by an exempt organization from the distribution of low-cost items is not income from an unrelated trade or business.

Faith Church,a § 501(c)(3) organization,operates a bingo game two times each week to raise money to support the youth activities of the church.For the current year,net proceeds from the bingo game are $900,000. a.​Determine the tax consequences for Faith Church if the bingo game is conducted in a jurisdiction where for-profit bingo games are illegal, and where the bingo game is legal for exempt entities. b.​Determine the tax consequences for Faith Church if the bingo game is conducted in a jurisdiction where bingo games are legal for both for-profit and exempt entities.

Help,Inc.,a tax-exempt organization,incurs lobbying expenses of $275,000 during the tax year.Help is eligible for and makes the § 501(h) lobbying expenditure election.During the year,Help spends $1,200,000 carrying out its exempt mission. a.Will the lobbying expense result in Help losing its exempt status? b.Calculate the amount of any tax that Help must pay associated with its lobbying expenses.

Assist,Inc.,a § 501(c)(3) organization,receives the following sources of support during the tax year. Is Assist,Inc.,classified as a private foundation?

City,Inc.,an exempt organization,has included among other amounts the following in calculating net unrelated business income of $500,000. The only expenses incurred associated with these items are rental expenses (which includes depreciation of $10,000) of $15,000.Calculate City,Inc.'s UBTI.

Rattler,Inc.,an exempt organization,trains disabled individuals to design web pages.Rather than hold a traditional graduation exercise,the graduates compete in a web design contest.Such activities are held four times each year.An admission fee of $10 is charged to the general public to attend the contest.Eight hundred people attended the contest this year,and prizes of $2,000 were given to the top 3 graduates.Calculate the amount of Rattler's unrelated business income from this activity.

Engaging in a prohibited transaction can result in an exempt organization being subject to Federal income tax,but such an act cannot cause the entity to lose its exempt status unless the exempt organization repeats the prohibited transaction.

Which of the following statements is correct?

Give an example of the indicated types of exempt organizations. a.League of Women Voters. b.Teachers' association. c.American Plywood Association. d.Six Flags over Texas theme park. e.Salvation Army. -§ 501(c)(5) labor organization

Which of the following are qualified corporate sponsorship payments?