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Exam 23: Exempt Entities

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Question 21

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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 ?????????? ??????????.
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 a flat 30% income tax rate.
E) All of the above statements are correct.

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

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Question 22

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Some of the excise taxes which may be imposed on private foundations may be imposed on both the private foundation and the foundation manager.

A) True
B) False

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Question 23

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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.

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

The income from a bingo game or a casino game conducted by an exempt organization may be 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. 10% initial tax and 25% additional tax on private foundation. b. 30% initial tax and 100% additional tax on private foundation. c. 10% initial tax and 200% additional tax on private foundation. d. 10% initial tax and 100% additional tax on disqualified person. e. 10% initial tax and 200% additional tax on the disqualified person. -Tax on failure to distribute adequate amounts of income

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.

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

Federal agencies exempt from Federal income tax under § 501(c)(1) are not subject to the unrelated business income tax (UBIT).

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

What are intermediate sanctions and to what types of exempt organizations do they apply?

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. -Branded calendars

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. -Corporate sponsorship payments

How can an exempt organization, otherwise classified as a private foundation, become a public charity?

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. -Debt-financed income is the net income from investment assets.

Which of the following statements are correct?

Gallery, a public charity, reports annual gross receipts of $100,000 and has total assets of $425,000. It should file a(n) :

If the unrelated business income of an exempt organization is $25,000 or less, the unrelated business income tax (UBIT) is $0.

Which of the following excise taxes are imposed on private foundations?

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