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Exam 23: Exempt Entities

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Question 61

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The purpose of the excise tax imposed on a private foundation for failure to distribute sufficient levels of income is to motivate the foundation to distribute more of its income for application to exempt purposes.

A) True
B) False

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Question 62

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The trade or business of selling merchandise where substantially all of the merchandise has been received as contributions or gifts is not subject to the unrelated business income tax.

A) True
B) False

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Question 63

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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%).

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.

Which of the following attributes are associated with exempt organizations?

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?

Match the following statements. a.May be subject to some Federal income taxation and classification may adversely affect amount of charitable contributions received. b.Tax imposed for engaging in transactions with disqualified persons. c.Tax imposed for making investments that are too risky. d.Tax imposed on investments that enable a private foundation to control unrelated for-profit businesses. -Tax on self-dealing

Which of the following statements are correct?

A church is one of the types of exempt organizations.

The unrelated business income tax (UBIT) is calculated by multiplying unrelated business taxable income by the highest corporate tax rate.

Blue,Inc.,receives its support from the following sources. Which of the following statements is correct?

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

Ice,Inc.,a § 501(c)(3) organization,has been leasing a building to Soft,Inc.,a taxable entity,for 15 years.The lease terminates in the current tax year.Ice's adjusted basis for the building is $225,000.It sells the building to the Development Partnership,a taxable entity,for $440,000.Selling expenses are $26,400.Calculate the effect of the sale on Ice's UBTI. ​ ​

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

Which of the following statements regarding exempt organization filing requirements is incorrect?

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. ​ a.Under what dollar amount is a distribution no longer a "low-cost item"? b.Provide examples of low-cost items.

Which of the following is a requirement 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?

George is running for mayor of Culpepper.The members of Third Church adamantly oppose his candidacy.They would like to run a political advertisement in the local newspaper opposing his candidacy.The newspaper ad would have no effect on Third Church's exempt status because the ad opposes George; it does not support his opponent.

What is the purpose of the unrelated business income tax?

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