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Exam 23: Exempt Entities

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Question 51

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Fourth Church operates a gift shop in its parish house.The total income of the church is $900,000.Of this amount, $400,000 comes from offerings and $500,000 comes from the net income of the gift shop.The gift shop operations are conducted by one full-time employee (the manager) and 50 volunteers.None of the volunteers works more than 15 hours per week.Which of the following statements is correct?

A) The $900,000 is unrelated business income.
B) The $500,000 of gift shop net income is unrelated business income.
C) The $400,000 is unrelated business income because the gift shop is a feeder organization.
D) None of the $900,000 is unrelated business income.
E) The unrelated business income tax does not apply to churches.

F) A) and B)
G) A) and D)

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Question 52

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Wett, Inc., a § 501(c)(3) exempt organization, acquired all the stock of a for-profit corporation for $150,000.Wett is a private foundation.The acquired corporation was not a related business.Calculate the tax on excess business holdings.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 53

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A trade or business that is operated by an exempt organization which otherwise would be subject to the tax on unrelated business income is exempt from tax, if the profits generated by the trade or business are used by the exempt organization for exempt purposes.

Which of the following are exempt organizations to which contributions made are eligible for the charitable contribution deduction?

Midge is the chairman of the board for a § 501(c)(3) exempt organization.She would like the exempt organization to be able to avoid private foundation classification status.Describe how this can be achieved.

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

What are the common characteristics of organizations that receive exempt status?

Robin, Inc., an exempt organization, acquired a building for $500,000 which it will lease to XYZ, Inc., for $35,000 annually.To finance the acquisition of the building, Robin secures a mortgage on it of $312,500.Advise Robin as to whether it has any unrelated debt-financed income or deductions.

An activity is not an unrelated trade or business for purposes of the unrelated business income tax (UBIT) unless it is profitable.

Why are some organizations exempt from Federal income tax?

If an exempt organization distributes "low-cost items" as an incidental part of its solicitation for charitable contributions, the distribution is not considered an unrelated trade or business.

Which of the following statements regarding low-cost articles is correct?

If an exempt organization conducts a trade or business that is regularly carried on by the organization, it is subject to the unrelated business income tax (UBIT).

An exempt organization that is eligible to elect under § 501(h) to engage in lobbying activities on a limited basis incurs no tax liability from lobbying, if the lobbying expenditures for the tax year do not exceed the lobbying expenditures ceiling.

A church is one of the types of exempt organizations.

Which of the following is one of the requirements that will enable mortgaged land acquired by an exempt organization for later exempt use to be excluded from debt-financed property, for purposes of the unrelated business income tax?

Which of the following excise taxes are imposed on the private foundation because it engages in prohibited transactions?

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

The tax consequences to a donor of making a charitable contribution to an exempt organization classified as a private foundation may be less favorable than the tax consequences to a donor of making a charitable contribution to an exempt organization that is not classified as a private foundation.

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