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Exam 14: Exempt Entities

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Question 61

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Even though substantially all the work of an unrelated trade or business is performed by volunteers,it can be subject to the unrelated business income tax (UBIT).

A) True
B) False

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Question 62

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For each of the following taxes which are imposed on private foundations, 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 jeopardizing investments

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Question 63

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Which of the following is not an example of an exempt organization?

Under what circumstances are bingo games not treated as an unrelated trade or business?

Match the following statements. a.Distribution of such items is not considered an unrelated trade or business if the value does not exceed $9.10 in 2008. 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. -Bingo games

Under what part of § 501(c)are most organizations exempt from Federal income taxation?

Match the following statements. a.Carries on a trade or business for the benefit of an exempt organization, remits its profits to the exempt organization, and is not exempt from Federal income tax. b.May be subject to some Federal income taxation and classification may adversely affect amount of charitable contributions received. c.Tax imposed for engaging in transactions with disqualified persons. d.Enables certain exempt organizations to engage in lobbying activities on a limited basis. e.Tax imposed on investments that enable a private foundation to control unrelated businesses. -Tax on self-dealing

Private foundations are not permitted to engage in lobbying activities.

Acquisition indebtedness consists of the unpaid amounts of which of the following for debt-financed property?

A general requirement for exempt status is that the net earnings of the organization not be used for the benefit of the members of the organization.

Watch,Inc.,a § 501(c)(3)exempt organization,solicits contributions through a mail campaign.An executive,who recently completed an executive MBA degree program,recommends that personal address labels be included as an additional way to motivate the potential donor to contribute.The value of these labels is $7.25 per potential donor.What is the effect of the inclusion of the address labels on Watch's unrelated business income?

Intermediate sanctions enable the IRS to revoke the exempt status of an exempt organization for a negotiated time period.

Well,Inc.,a private foundation,makes a speculative investment of $500,000 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 with the correct description. a.Exempt organization under § 501(c)(3). b.May not be subject to Federal income tax. c.Permits limited lobbying activities. d.Exempt organization under § 501(c)(7). e.Carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt organization. -Kentwood Rodeo Club

Receiving too little of its support from gross investment income and unrelated business taxable income can result in an exempt organization being classified as a private foundation.

Which of the following are available options for the IRS in dealing with an exempt organization entering into prohibited transactions?

The purpose of the excise tax imposed on a private foundation for failure to distribute sufficient levels of income is to motivate the foundation to distribute more of its income for application to exempt purposes and thus be classified as a feeder organization.

What is a feeder organization? How is it taxed?

Match the following statements with the correct description. a.Exempt organization under § 501(c)(3). b.May not be subject to Federal income tax. c.Permits limited lobbying activities. d.Exempt organization under § 501(c)(7). e.Carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt organization. -§ 501(h)

Orange,Inc.,a private foundation,engages in a transaction with a disqualified person in the amount of $800,000.Calculate the tax on self-dealing.Assume that corrective action is taken so that the additional tax does not apply.