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Exam 15: Exempt Entities

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Question 41

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

A) Under certain circumstances, a corporate sponsorship payment can be classified as not being an unrelated trade or business.
B) Under certain circumstances, a casino game can be classified as not being an unrelated trade or business.
C) Under certain circumstances, the exchanging or renting of membership lists to other exempt organizations can be classified as not being an unrelated trade or business.
D) Only a. and c. are correct.
E) a., b., and c. all are correct.

F) None of the above
G) A) and C)

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Question 42

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Theater, Inc., an exempt organization, owns a printing company, Printers, Inc., which remits 85% of its profits to Theater, Inc. Since Printers remits at least 85% of its profits to Theater, neither Theater, Inc., nor Printers, Inc., must pay income tax on this $85,000 ($100,000 × 85%).

A) True
B) False

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Question 43

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Discuss benefits for which an exempt organization may be eligible, other than exemption from Federal income tax.

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

A feeder organization is exempt from Federal income taxation because it carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt entity.

The excise tax that is imposed on private foundations for making jeopardizing investments is imposed because the foundation has made speculative investments that put the foundation's income at risk.

The excise tax imposed on private foundations for excess business holdings is imposed on investments that enable the private foundation to control publicly-held rather than privately-held businesses.

City, Inc., an exempt organization, has included among other amounts the following in calculating net unrelated business income of $500,000. The only expenses incurred associated with these items are rental expenses (which includes depreciation of $10,000) of $15,000. Calculate City, Inc.'s UBTI.

To satisfy the "not for profit" requirement for exempt status, the entity may not be engaged in a trade or business.

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

Match the following tax forms. a. Return of Private Foundation. b. Application for Recognition of Exemption under § 501(c)(3). c. Return of Organization Exempt from Income Tax. d. Return of Certain Excise Taxes on Charities and Other Persons. e. Application for Recognition of Exemption under § 501(a). f. Application for Extension of Time. -Form 990

Which of the following statements regarding the disclosure Regulations is correct?

Give an example of the indicated types of exempt organizations. -Not an exempt organization

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

Tax on jeopardizing investments

What tax forms are used to apply for exempt status?

Third Church operates a gift shop in its parish house. The total income of the church is $800,000. Of this amount, $300,000 comes from offerings and $500,000 comes from the net income of the gift shop. The gift shop operations are conducted by six full-time, paid employees. Which of the following statements is correct?

Debt-financed income is the net income from debt financed property.

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

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