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Exam 15: Exempt Entities

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Question 31

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

A) True
B) False

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Question 32

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Blue, Inc., receives its support from the following sources. $\begin{array}{lr}\text { Governmental unit } A \text {, for services rendered } & \$ 18,000 \\\text { General public, for services rendered } & 25,000 \\\text { Gross investment income } & 8,000\\\text { Contributions from individual substantial contributors (disqualified }\\\text { persons) }&19,000\end{array}$ Which of the following statements is correct?

A) Blue, Inc., is a private foundation because it satisfies the external support test and fails the internal support test.
B) Blue, Inc., is not a private foundation because it fails both the internal and external support tests.
C) Blue, Inc., is a private foundation because it satisfies both the external support test and the internal support test.
D) Blue, Inc., is not a private foundation because it satisfies both the external support test and the internal support test.
E) None of the statements is true.

F) All of the above
G) A) and D)

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Question 33

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An exempt entity in no circumstance is subject to Federal income tax.

What are the excise taxes imposed on private foundations, and why are they imposed?

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)].

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

Personal property rental income is subject to and real property rental income is not subject to the unrelated business income tax.

Only certain exempt organizations must obtain IRS approval to obtain exempt status.

Match the following statements. -Tax on excess business holdings

Rattler, Inc., an exempt organization, trains disabled individuals to design web pages. Rather than hold a traditional graduation exercise, the graduates compete in a web design contest. Such activities are held four times each year. An admission fee of $10 is charged to the general public to attend the contest. Eight hundred people attended the contest this year, and prizes of $2,000 were given to the top 3 graduates. Calculate the amount of Rattler's unrelated business income from this activity.

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?

Give an example of the indicated types of exempt organizations. -§ 501(c) (6) business league

Match the following tax forms. -Form 1023

Maroon, Inc., a tax-exempt organization, leases a building and equipment to Brown Partnership. The rental income from the building is $100,000 and from the equipment is $9,000. Rental expenses are $40,000 for the building and $4,000 for the equipment. What adjustment must be made to net unrelated business income?

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

Which exempt organizations are not required to file an annual Federal tax return?

Match the following statements. -Debt-financed income is the net income from investment assets.

What is the purpose of the "broadly supported" exception for an exempt organization being classified as a private foundation?

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

An eligible § 501(c)(3) organization has made the § 501(h) election to participate in lobbying on a limited basis. If the lobbying nontaxable amount is exceeded, what are the potential tax consequences to the exempt organization?