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Exam 15: Exempt Entities

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Question 61

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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. -Private foundation

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Question 62

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A profit-related activity of an exempt organization avoids the unrelated business income tax if greater than 80% of the merchandise sold had been received as a contribution.

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B) False

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Question 63

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Are some exempt organizations eligible to be recipients of contributions for which the donor does not qualify for a charitable contribution deduction?

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).

Engaging in a prohibited transaction can result in an exempt organization being subject to Federal income tax, but cannot cause it to lose its exempt status unless the exempt organization repeats the prohibited transaction.

For each of the following taxes which are imposed on private foundations, match the appropriate initial tax or additional tax. -Tax on failure to distribute

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

Francis is the CEO of Give, Inc., a § 501(c)(3) organization. Francis informs you that the will of a major donor transfers 100% of the stock of Friendly Hot Dogs to Give, Inc. Since Friendly is a profitable entity, Francis would like for Give to continue to own and operate Friendly Hot Dogs. You inform Francis that Friendly would be a feeder organization. Describe for the CEO what a feeder organization is and how it is taxed.

For purposes of the unrelated business income tax (UBIT), a trade or business consists of any activity conducted for the production of income through the sale of merchandise, or from the performance of services for which profits have been earned during at least two of the five previous years.

Medical, Inc., a § 501(c)(3) exempt organization, engages in an excess benefit transaction. 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.

Midnight Basketball, Inc., an exempt organization that organizes and conducts basketball games for youths ages 10-13, receives a $20,000 contribution from Brown Shoe Company. Midnight agrees to put Brown's logo on the cover of its monthly newsletter. a. Is the contribution unrelated business income to Midnight? b. Assume that instead of putting Brown's logo on the cover of its newsletter, Midnight agrees to include a statement in the newsletter that youth playing in the games conducted by Midnight wear only shoes manufactured by Brown. Is the contribution unrelated business income to Midnight? b. change if the amount of the payment was $7,500 instead of $20,000? c. Would your answer in

Why are some organizations exempt from Federal income tax?

What income and activities are not subject to the feeder organization rules?

Blue, Inc., receives its support from the following sources.

Match the following tax forms. -Form 1023

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?

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)].

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

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

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