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Exam 15: Exempt Entities

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Question 51

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Certain § 501(c)(3) exempt organizations are permitted to engage in lobbying activities in the same manner as a C corporation.

A) True
B) False

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Question 52

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To satisfy the "not for profit" requirement for exempt status, the entity may not be engaged in a trade or business.

A) True
B) False

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Question 53

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All organizations that are exempt from Federal income tax are exempt under § 501(c)(3).

Debt-financed property consists of all real property of a tax-exempt organization on which there is a mortgage.

Are organizations that qualify for exempt organization status completely exempt from Federal income taxation?

Which of the following statements is correct regarding the unrelated business income tax (UBIT) ?

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

Which requirements must be satisfied for an exempt organization to be classified as an unrelated trade or business? Is being classified as an unrelated trade or business good or bad?

A feeder organization is an exempt organization that provides funding for nutritional programs for children.

Medical, Inc., a § 501(c)(3) exempt organization, engages in an excess benefit transaction, such that the intermediate sanctions rules may apply. The amount of the excess benefit is $50,000. For the organization management, the participation in the excess benefit transaction was not willful and was due to reasonable cause. Calculate the amount of the excise tax (first-level tax) imposed under the intermediate sanctions provision.

Match the following tax forms. -Form 990

Assist, Inc., a § 501(c)(3) organization, receives the following sources of support during the tax year. $\begin{array} { l r } \text { General public for services rendered } & \$ 22,000 \\\text { Governmental unit A for services rendered } & 30,000 \\\text { Governmental unit B for services rendered } & 3,000 \\\text { Governmental unit C for services rendered } & 8,000 \\\text { Gross investment income } & 19,000 \\\text { Contributions from individual substantial contributors (disqualified } & 18,000 \\\text { persons) } &\end{array}$ Is Assist, Inc., classified as a private foundation?

An educational organization such as the College of William and Mary that is exempt under § 501(c)(3) cannot be classified as a private foundation if its only sources of revenue are from tuition and alumni contributions.

Give an example of the indicated types of exempt organizations. -§ 501(c) (5) labor organization

For each of the following taxes which are imposed on private foundations and/or Foundation Managers, match the appropriate initial tax or additional tax. -Tax on self-dealing

City, Inc., an exempt organization, has included among other amounts the following in calculating net unrelated business income of $500,000. $\begin{array} { l r } \text { Dividend income } & \$ 12,000 \\\text { Interest income } & 6,000 \\\text { Royal ty income } & 15,000 \\\text { Rent income from } & \\\text { equipment } & 25,000\end{array}$ 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.

All exempt organizations which are subject to the unrelated business income tax must file Form 990-T (Exempt Organization Business Income Tax Return).

Why are some organizations exempt from Federal income tax?

Give an example of the indicated types of exempt organizations. -§ 501(c) (4) civic league

Even though a church is not required to obtain IRS approval of its exempt status, it still annually must file a Form 990.