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Exam 23: Exempt Entities

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Question 71

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Warmth, Inc., a private foundation, makes an expenditure of $800,000 that should not be made by a private foundation.Calculate the tax on taxable expenditures.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 72

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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?

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To not be classified as a private founda...

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Question 73

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Which of the following statements are correct with respect to the unrelated business income tax?

A profit-related activity of an exempt organization avoids the unrelated business income tax if greater than 50% of the merchandise sold had been received as a contribution.

If an exempt organization is required to file an annual information return, on what form is it filed?

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

Identify the components of the tax model for unrelated business taxable income.

An intermediate sanction imposed by the IRS on an exempt organization is a greater sanction than revocation of exempt status.

While certain § 501(c)(3) organizations can elect to be permitted to lobby on a limited basis, churches are not eligible to make a § 501(h) election.

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?

While the major objective of the Federal income tax law is to raise revenue, social considerations and economic objectives also affect the tax law.

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

The excise tax imposed on a private foundation's investment income can be imposed as an initial (first-level) tax but cannot be imposed as an additional (second-level) tax.

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?

The excise tax imposed on a private foundation's excess business holdings is in effect an audit fee to defray IRS expenses.

Plus, Inc., is a § 501(c)(3) organization.It generates a small amount of net income each year.Ralph, the CEO of Plus, Inc., is concerned that Plus may be subject to the unrelated business income tax.Is there a materiality exception to this tax?

Wonder, Inc., a private foundation, makes a speculative investment of $800,000 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.

Which of the following statements is correct?

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

An exempt organization can avoid classification as a private foundation if it is broadly publicly supported.To be broadly publicly supported, which of the following is required?