Exam 15: Exempt Entities

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%).

For purposes of the unrelated business income tax (UBIT), land that is acquired by the exempt organization for later exempt-use is excluded from the definition of debt-financed property if certain requirements are satisfied. Which of the following is not included in the requirements?

For an exempt organization to be subject to the unrelated business income tax, the trade or business must not be substantially related to the exempt purpose of the organization.