Exam 14: Exempt Entities

Match the following statements with the correct description. a.Exempt organization under § 501(c)(3). b.May not be subject to Federal income tax. c.Permits limited lobbying activities. d.Exempt organization under § 501(c)(7). e.Carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt organization. -University of Virginia

Blue,Inc.,receives its support from the following sources. Which of the following statements is correct?

Describe how an exempt organization can be eligible to lobby.

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.

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.

Country,Inc.,an exempt organization,has included among other amounts the following in calculating net unrelated business income of $400,000. The only expenses incurred associated with these items are rental expenses (which includes depreciation of $9,500)of $14,000.Calculate Country,Inc.'s UBTI.

Match the following statements. a.Distribution of such items is not considered an unrelated trade or business if the value does not exceed $9.10 in 2008. 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. -Membership lists

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)(3)organization

Exempt organizations which are required to file an annual information return,except for Private Foundations,use Form 990 (Return of Organization Exempt from Income Tax).

All exempt organizations must obtain IRS approval to obtain exempt status.

For each of the following taxes which are imposed on private foundations, 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 self-dealing

Assist,Inc.,a § 501(c)(3)organization,receives the following sources of support during the tax year. Is Assist,Inc.,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 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.

Theater,Inc.,an exempt organization,owns a printing company,Printers,Inc.,which remits 80% of its profits to Theater,Inc.Since Printers remits at least 80% of its profits to Theater,neither Theater,Inc.,nor Printers,Inc.,must pay income tax on this $80,000 ($100,000 *80%).

Match the following statements. a.Carries on a trade or business for the benefit of an exempt organization, remits its profits to the exempt organization, and is not exempt from Federal income tax. b.May be subject to some Federal income taxation and classification may adversely affect amount of charitable contributions received. c.Tax imposed for engaging in transactions with disqualified persons. d.Enables certain exempt organizations to engage in lobbying activities on a limited basis. e.Tax imposed on investments that enable a private foundation to control unrelated businesses. -Feeder organization

The excise tax imposed on private foundations for excess business holdings is imposed on investments that enable the private foundation to control publicly-held rather than privately-held businesses.

Match the following statements. a.Distribution of such items is not considered an unrelated trade or business if the value does not exceed $9.10 in 2008. 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

The unrelated business income tax (UBIT)is calculated by multiplying unrelated business taxable income by the highest corporate tax rate.

Which of the following statements are correct with respect to the unrelated business income tax?

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 which is not a private foundation. e.Appropriate definition. f.Annual information return of a private foundation. -The trade or business consists of selling merchandise,and substantially all of the merchandise has been received as gifts or contributions.