Exam 23: Exempt Entities

The Dispensary is a pharmacy that is part of a § 501(c)(3) hospital.Its primary mission is to dispense medicines for hospital patients.In addition,the pharmacy dispenses medicines to former hospital patients for a period of up to 30 days after discharge from the hospital.It does this for the dual purpose of convenience to the former patients (i.e. ,the closest pharmacy is 6 miles away),and to ensure that the former patients receive the medicines that have been prescribed for them. The Dispensary carefully carries out the policy of the hospital board that no more than 25% of its gross revenues come from former-patient medicine sales.If necessary,in December of each year,sales to former patients are curtailed to assure compliance with this policy.Sales revenue from each of the two sources is as follows for the tax year. Medicine dispensed to hospital patients $900,000 Medicine sales to former patients 100,000 Calculate the amount of The Dispensary's unrelated business income.

Which requirements must be satisfied for an exempt organization to be classified as an unrelated trade or business? Is being classified as an unrelated trade or business good or bad?

Which of the following attributes are associated with exempt organizations?

Faith Church,a § 501(c)(3) organization,operates a bingo game two times each week to raise money to support the youth activities of the church.For the current year,net proceeds from the bingo game are $900,000. a.Determine the tax consequences for Faith Church if the bingo game is conducted in a state where for-profit bingo games are illegal,and where the bingo game is legal for exempt entities. b.Determine the tax consequences for Faith Church if the bingo game is conducted in a state and locality where bingo games are legal for both for-profit and exempt entities.

Match the following statements. a.Distribution of such items is not considered an unrelated trade or business if they are "low-cost items".b.Is considered an unrelated trade or business if the amount received is contingent upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events.c.Is considered an unrelated trade or business if can be conducted by commercial (for-profit) entities.d.A trade or business that consists of either renting or exchanging these with another exempt organization is not an unrelated trade or business. -Corporate sponsorship payments

Unrelated debt-financed income,net of the unrelated debt-financed deductions,is subject to the unrelated business income tax only if the exempt organization is a private foundation.

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

Match the following statements. a.Distribution of such items is not considered an unrelated trade or business if they are "low-cost items".b.Is considered an unrelated trade or business if the amount received is contingent upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events.c.Is considered an unrelated trade or business if can be conducted by commercial (for-profit) entities.d.A trade or business that consists of either renting or exchanging these with another exempt organization is not an unrelated trade or business. -Branded calendars

Some of the excise taxes which may be imposed on private foundations may be imposed on both the private foundation and the foundation manager.

Midnight Basketball,Inc. ,an exempt organization that organizes and conducts basketball games for youths ages 10-13,receives a $20,000 contribution from Brown Shoe Company.Midnight agrees to put Brown's logo on the cover of its monthly newsletter. a.Is the contribution unrelated business income to Midnight? b.Assume that instead of putting Brown's logo on the cover of its newsletter,Midnight agrees to include a statement in the newsletter that youth playing in the games conducted by Midnight wear only shoes manufactured by Brown.Is the contribution unrelated business income to Midnight? b.change if the amount of the payment was $7,500 instead of $20,000? c. Would your answer in

Maroon,Inc. ,a tax-exempt organization,leases a building and equipment to Brown Partnership.The rental income from the building is $100,000 and from the equipment is $9,000.Rental expenses are $40,000 for the building and $4,000 for the equipment.What adjustment must be made to net unrelated business income?

Define a qualified corporate sponsorship payment.

Debt-financed property consists of all real property of a tax-exempt organization on which there is a mortgage.

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

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

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

If the unrelated business income of an exempt organization is $25,000 or less,the unrelated business income tax (UBIT) will be $0.

Define a private foundation.

Which exempt organizations are not required to file an annual Federal tax return?

To what types of organizations does the UBIT apply?