Question 1

Even though a church is not required to obtain IRS approval of its exempt status, it still must annually file a Form
990.

Accepted Answer

A) True 
 B)False

Question 2

Match the following statements.
-Private foundation

Accepted Answer

A) May be subject to some Federal income taxation, and classification may adversely affect the 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. 
A) May be subject to some Federal income taxation, and classification may adversely affect the 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.

Question 3

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.

Accepted Answer

a. For 2019, a low-cost item i

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Tan, Inc., a tax-exempt organization, has $65,000 of net unrelated business income. Total charitable contributions (all associated with the unrelated trade or business) are $7,500. Assuming that the $7,500 was deducted in calculating net unrelated business income, what is Tan's unrelated business taxable income?

Accepted Answer

A)  $65,000 
B)  $65,250 
C)  $66,000 
D)  $72,500 
A)  $65,000 
B)  $65,250 
C)  $66,000 
D)  $72,500

Question 7

Define a private foundation.

Accepted Answer

By default, all exempt entities are priv

Question 8

Agnes is aware that a feeder organization is subject to Federal income taxation. She wonders whether an organization that is otherwise taxable as a feeder organization can avoid such status if it remits at least 80% of its profits to the § 501(c)(3) entity.

Accepted Answer

No. While a feeder organization carries

Question 9

Spirit, Inc., a § 501(c)(3) organization, is classified as a private foundation. It reports investment income of $175,000.
Calculate Spirit's tax on its investment income.

Accepted Answer

Investment income $1

Question 10

Give an example of the indicated types of exempt organizations.
-§ 501(c)(4) civic league

Accepted Answer

A) League of Women Voters. 
B) Teachers’ association. 
C) American Plywood Association. 
D) Six Flags over Texas theme park. 
E) Salvation Army. 
A) League of Women Voters. 
B) Teachers’ association. 
C) American Plywood Association. 
D) Six Flags over Texas theme park. 
E) Salvation Army.

Question 11

One of the requirements for an exempt organization to be classified as an unrelated trade or business is that the trade or business is not substantially related to the exempt purpose of the organization. How can an exempt organization avoid satisfying this requirement?

Accepted Answer

To avoid satisfying this requirement, th

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Match the following statements.
-The trade or business consists of selling merchandise, and substantially all of the merchandise has been received as gifts or contributions to the entity.

Accepted Answer

A) Exempt from tax on unrelated business. 
B) Inappropriate definition. 
C) Exempt organization may be subject to the tax on unrelated business income. 
D) Annual information return of an exempt organization that is required to file a return and which is not a private foundation. 
E) Appropriate definition.
F)Annual information return of a private foundation. 
A) Exempt from tax on unrelated business. 
B) Inappropriate definition. 
C) Exempt organization may be subject to the tax on unrelated business income. 
D) Annual information return of an exempt organization that is required to file a return and which is not a private foundation. 
E) Appropriate definition.
F)Annual information return of a private foundation.

Question 14

A feeder organization is an exempt organization that provides funding for nutritional programs for children.

Accepted Answer

A) True 
 B)False

Question 15

What is the purpose of the unrelated business income tax?

Accepted Answer

The unrelated business income tax is des

Question 16

Match the following statements.
-Form 990-PF.

Accepted Answer

A) Exempt from tax on unrelated business. 
B) Inappropriate definition. 
C) Exempt organization may be subject to the tax on unrelated business income. 
D) Annual information return of an exempt organization that is required to file a return and which is not a private foundation. 
E) Appropriate definition.
F)Annual information return of a private foundation. 
A) Exempt from tax on unrelated business. 
B) Inappropriate definition. 
C) Exempt organization may be subject to the tax on unrelated business income. 
D) Annual information return of an exempt organization that is required to file a return and which is not a private foundation. 
E) Appropriate definition.
F)Annual information return of a private foundation.

Question 17

City, Inc., an exempt organization, has included among other amounts the following in calculating net unrelated business income of $500,000. $\begin{array}{lr}
\text { Dividend income } & \$ 12,000 \
\text { Interest income } & 6,000 \
\text { Royalty income } & 15,000 \
\text { Rent income from } & \
\text { equipment } & 25,000
\end{array}$ 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.

Accepted Answer

@#IMG-DLM& The net rental income from th

Question 18

To provide the greatest Federal income tax benefits for its donors, Orchestra would prefer to be a:

Accepted Answer

A)  Public charity. 
B)  Private foundation. 
C)  C corporation. 
D)  Feeder organization. 
A)  Public charity. 
B)  Private foundation. 
C)  C corporation. 
D)  Feeder organization.

Question 19

Match the following statements.
-Unrelated business income is generally that derived from the unrelated trade or business reduced by the deductions directly connected with the conduct of the unrelated trade or business.

Accepted Answer

A) Exempt from tax on unrelated business. 
B) Inappropriate definition. 
C) Exempt organization may be subject to the tax on unrelated business income. 
D) Annual information return of an exempt organization that is required to file a return and which is not a private foundation. 
E) Appropriate definition.
F)Annual information return of a private foundation. 
A) Exempt from tax on unrelated business. 
B) Inappropriate definition. 
C) Exempt organization may be subject to the tax on unrelated business income. 
D) Annual information return of an exempt organization that is required to file a return and which is not a private foundation. 
E) Appropriate definition.
F)Annual information return of a private foundation.

Question 20

All of the stock of Hot Dog, Inc., a fast-food franchise operating in nine southeastern states, is owned by Winsome America, Inc., a § 501(c)(3) organization. The stock was received last year as an inheritance from Rob, the entrepreneur who founded the chain.
During the current year, Hot Dog reports profits before taxes and taxable income of $8 million. Hot Dog distributes
$5 million to its parent, and it retains the balance for expansion purposes.
a. What are the tax consequences to Hot Dog and to Winsome America?

b. How would your answer ina. change if Hot Dog distributes $8 million to Winsome, rather than $5 million?

Accepted Answer

a. Hot Dog is a feeder organization. The

Exam 23: Exempt Entities

Even though a church is not required to obtain IRS approval of its exempt status, it still must annually file a Form 990.

Match the following statements. -Private foundation

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

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

Define a private foundation.

Agnes is aware that a feeder organization is subject to Federal income taxation. She wonders whether an organization that is otherwise taxable as a feeder organization can avoid such status if it remits at least 80% of its profits to the § 501(c)(3) entity.

Spirit, Inc., a § 501(c)(3) organization, is classified as a private foundation. It reports investment income of $175,000. Calculate Spirit's tax on its investment income.

Give an example of the indicated types of exempt organizations. -§ 501(c)(4) civic league

One of the requirements for an exempt organization to be classified as an unrelated trade or business is that the trade or business is not substantially related to the exempt purpose of the organization. How can an exempt organization avoid satisfying this requirement?

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

Match the following statements. -The trade or business consists of selling merchandise, and substantially all of the merchandise has been received as gifts or contributions to the entity.

A feeder organization is an exempt organization that provides funding for nutritional programs for children.

What is the purpose of the unrelated business income tax?

Match the following statements. -Form 990-PF.

To provide the greatest Federal income tax benefits for its donors, Orchestra would prefer to be a:

Match the following statements. -Unrelated business income is generally that derived from the unrelated trade or business reduced by the deductions directly connected with the conduct of the unrelated trade or business.

Understanding and Working With the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

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