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Exam 23: Exempt Entities

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Question 1

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

A) True
B) False

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Question 2

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If personal property is leased with real property and more than 45% of the rent income under the lease is from personal property,all of the rent income is subject to the unrelated business income tax.

A) True
B) False

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Question 3

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

A corporate sponsorship payment that is contingent on attendance at a sporting event increases the amount of unrelated business income.

Pearl Inc. ,a tax-exempt organization,leases land,building,and machinery to Purple Partnership for a 5-year period.The rental income from the land and building is $100,000,with related expenses of $40,000.The rental income from the machinery is $9,000,with related expenses of $3,000.What adjustment must be made to net unrelated business income?

For each of the following taxes which are imposed on private foundations and/or Foundation Managers, match the appropriate initial tax or additional tax. a.5% initial tax and 25% additional tax on private foundation.b.15% initial tax and 100% additional tax on private foundation.c.100% additional tax on private foundation and 50% additional tax on foundation manager.d.5% initial tax and 200% additional tax on private foundation.e.5% initial tax and 200% additional tax on the disqualified person. -Tax on failure to distribute

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. -Form 990-PF.

What tax forms are used to apply for exempt status?

Which of the following statements regarding intermediate sanctions is correct?

The income from a bingo game or a casino game conducted by an exempt organization may be unrelated business income.

If an exempt organization conducts a trade or business that consists of either exchanging or renting to other exempt organizations the organization's donor or membership list,such trade or business is an unrelated trade or business.

Unless the "widely available" provision is satisfied,a § 501(c)(3) exempt organization (excluding churches and private foundations) must make copies of the following available to the general public: Form 990 (Return of Organization Exempt from Income Tax) and Form 1023 [Application for Recognition of Exemption under § 501(c)(3)] or Form 1024 [Application for Recognition of Exemption under § 501(a)].

Tan,Inc. ,a tax-exempt organization,has $65,000 of net unrelated business income.Total charitable contributions (all associated with the unrelated trade or business) are $7,500.Assuming that the $7,500 was deducted in calculating net unrelated business income,what is Tan's unrelated business taxable income?

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, broadcast ratings, or other factors indicating the degree of public exposure to one or more events.c.Is considered an unrelated trade or business if 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. -Membership lists

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.

Miracle,Inc. ,is a § 501(c)(3) organization involved in medical research.Based on its expectation that proposed legislation will adversely affect the funding supporting its mission,Miracle hires a lobbyist to work in Washington to represent its views. ​ Miracle is eligible for and thus makes the § 501(h) election.It calculates the lobbying nontaxable amount to be $100,000 ($500,000 exempt purpose expenditures × 20%).The total lobbying expenditures for the year were $115,000.Calculate Miracle's tax on excess lobbying expenditures.

Match the following tax forms. a.Return of Private Foundation.b.Application for Recognition of Exemption under § 501(c)(3).c.Return of Organization Exempt from Income Tax.d.Return of Certain Excise Taxes on Charities and Other Persons under Chapters 41 and 42 of the Internal Revenue Code.e.Application for Recognition of Exemption under § 501(a).f.Application for Extension of Time. -Form 1024

Agnes is aware that a feeder organization is subject to Federal income taxation.She wonders whether an organization otherwise taxable as a feeder organization can avoid such status if it remits less than 80% of its profits to the § 501(c)(3) entity.

The League of Women Voters is a § 501(c)(3) organization.

To be classified as a private foundation,the exempt status of an organization can be provided under either § 501(c)(1) or § 501(c)(3).