Exam 15: Exempt Entities

For each of the following taxes that are imposed on private foundations and/or foundation managers, match the appropriate initial tax or additional tax. -Tax on self-dealing

Match the following statements. -Tax on excess business holdings

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 § 501c)3) entity.

All exempt organizations that are subject to the unrelated business income tax must file Form 990-T Exempt Organization Business Income Tax Return).

Match the following statements. -Branded tote bags

Which of the following statements is correct regarding the unrelated business income tax UBIT)?

Garden, Inc., a qualifying § 501c)3) organization, incurs lobbying expenditures of $210,000 during the taxable year. Exempt purpose expenditures are $900,000. If Garden makes the election under § 501h) to make lobbying expenditures on a limited basis, its tax liability resulting from the lobbying expenditures is:

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

Assist, Inc., a § 501c)3) organization, receives the following sources of support during the tax year. General public for services rendered \ 22,000 Governmental unit A for services rendered 30,000 Governmental unit B for services rendered 3,000 Governmental unit C for services rendered 8,000 Gross investment income 19,000 Contributions from individual disqualified persons 18,000 Is Assist, Inc., classified as a private foundation? Explain.

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

Match the following tax forms. -Form 990

Discuss any negative tax consequences that result from an exempt organization being classified as a private foundation.

A museum's lobbying nontaxable amount is $600,000. Its grass roots nontaxable amount is:

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

Match the following statements. -Tax on self-dealing

For purposes of the unrelated business income tax UBIT), a trade or business consists of any activity conducted for the production of income through the sale of merchandise, or from the performance of services for which profits have been earned during at least three of the five previous years.

Federal agencies exempt from Federal income tax under § 501c)1) are not subject to the unrelated business income tax UBIT).

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?

Watch, Inc., a § 501c)3) exempt organization, solicits contributions through a mail campaign. An executive who recently completed an executive MBA degree program recommends that personal address labels be included as an additional way to motivate the potential donor to contribute. The value of these labels is $3.95 per potential donor. What is the effect of the inclusion of the address labels on Watch's unrelated business income?

Engaging in a prohibited transaction can result in an exempt organization being subject to Federal income tax, but such an act cannot cause the entity to lose its exempt status unless the exempt organization repeats the prohibited transaction.