Exam 23: Exempt Entities

Match the following tax forms. a.Return of Private Foundation.b.Application for Recognition of Exemption under § 501(c)(3).c.Return of Organization Exempt from Income Tax.d.Return of Certain Excise Taxes on Charities and Other Persons under Chapters 41 and 42 of the Internal Revenue Code.e.Application for Recognition of Exemption under § 501(a).f.Application for Extension of Time. -Form 1023

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

Arbor,Inc. ,an exempt organization,leases land,building,and machinery to a tenant for a 5-year period.The rent income for the land and building is $400,000 per year and that from the related machinery is $80,000 per year.Expenses incurred by Arbor for the land and building during the year are $60,000 and those for the machinery are $36,000.Net unrelated business income,which includes the above rental income and expenses,is $800,000.Calculate Arbor's unrelated business taxable income.

Which of the following statements regarding the unrelated business income tax is not correct?

For each of the following taxes which are imposed on private foundations and/or Foundation Managers, match the appropriate initial tax or additional tax. a.5% initial tax and 25% additional tax on private foundation.b.15% initial tax and 100% additional tax on private foundation.c.100% additional tax on private foundation and 50% additional tax on foundation manager.d.5% initial tax and 200% additional tax on private foundation.e.5% initial tax and 200% additional tax on the disqualified person. -Tax on excess business holdings

What is the purpose of the "broadly supported" exception for an exempt organization being classified as a private foundation?

Match the following statements. 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. -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.

Match the following statements. 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. -The trade or business is not substantially related to the exempt purpose of the organization.

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.

Help,Inc. ,a tax-exempt organization,incurs lobbying expenses of $275,000 during the tax year.Help is eligible for and makes the § 501(h) lobbying expenditure election.During the year,Help spends $1,200,000 carrying out its exempt mission. a.Will the lobbying expense result in Help losing its exempt status? b.Calculate the amount of any tax that Help must pay associated with its lobbying expenses.

Give an example of the indicated types of exempt organizations. a.League of Women Voters.b.Teachers' association.c.American Plywood Association.d.Six Flags over Texas theme park.e.Salvation Army. -§ 501(c)(5) labor organization

An educational organization such as the College of William and Mary that is exempt under § 501(c)(3) cannot be classified as a private foundation if its only sources of revenue are from tuition and alumni contributions.

Rattler,Inc. ,an exempt organization,trains disabled individuals to design web pages.Rather than hold a traditional graduation exercise,the graduates compete in a web design contest.Such activities are held four times each year.An admission fee of $10 is charged to the general public to attend the contest.Eight hundred people attended the contest this year,and prizes of $2,000 were given to the top 3 graduates.Calculate the amount of Rattler's unrelated business income from this activity.

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

Certain § 501(c)(3) exempt organizations are permitted to engage in lobbying activities in the same manner as taxable organizations.

Match the following statements. 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. -Debt-financed income is the net income from debt financed property.