Question 1

To maintain exempt status, an organization must do which of the following:

Accepted Answer

A)  Satisfy only an organizational test. 
B)  Satisfy only an operational test. 
C)  Satisfy both an organizational test and an operational test. 
D)  Satisfy a financial test. 
E)  Once exempt status is granted, it will continue regardless of whether the organizational test and the operational test are satisfied. 
A)  Satisfy only an organizational test. 
B)  Satisfy only an operational test. 
C)  Satisfy both an organizational test and an operational test. 
D)  Satisfy a financial test. 
E)  Once exempt status is granted, it will continue regardless of whether the organizational test and the operational test are satisfied. C

Question 2

Loyal, Inc., is a §501(c)(3) organization that is not classified as a private foundation. During the current year, it is subject to intermediate sanctions. What other options does the IRS have in dealing with an exempt organization engaging in prohibited transactions?

Accepted Answer

The IRS has two other options available for dealing with an exempt organization engaging in prohibited transactions. First, the IRS could attempt to subject part or all of the organization's income to Federal income tax. Second, it could revoke the exempt status of the organization.

Question 3

Which of the following are available options for the IRS in dealing with an exempt organization entering into prohibited transactions?

Accepted Answer

A)  Attempt to subject all or part of the organization's income to Federal income tax. 
B)  Revoke the exempt status of the organization. 
C)  Impose intermediate sanctions in the form of excise taxes. 
D)  Only a. and b. 
E)  a., b., and c. 
A)  Attempt to subject all or part of the organization's income to Federal income tax. 
B)  Revoke the exempt status of the organization. 
C)  Impose intermediate sanctions in the form of excise taxes. 
D)  Only a. and b. 
E)  a., b., and c. E

Question 4

Exempt organizations which are appropriately classified as private foundations include churches, educational institutions, and charitable organizations receiving a major portion of their support from the general public or the U.S., a state, or a political subdivision thereof.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements regarding low-cost articles is correct?

Accepted Answer

A)  The distribution of low-cost articles can be classified as not being an unrelated trade or business. 
B)  For 2011, a low-cost article is one the costs $9.70 or less. 
C)  Any contributions received as the result of the distribution of low-cost articles must be included in unrelated business income. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct. 
A)  The distribution of low-cost articles can be classified as not being an unrelated trade or business. 
B)  For 2011, a low-cost article is one the costs $9.70 or less. 
C)  Any contributions received as the result of the distribution of low-cost articles must be included in unrelated business income. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct.

Question 6

Which of the following exempt organizations are required to file Form 990 (Return of Organization Exempt from Income Tax)?

Accepted Answer

A)  Federal agencies. 
B)  Churches. 
C)  Private foundations. 
D)  None of these entities must file Form 990. 
A)  Federal agencies. 
B)  Churches. 
C)  Private foundations. 
D)  None of these entities must file Form 990.

Question 7

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 one full-time employee (the manager) and 50 volunteers. None of the volunteers works more than 15 hours per week. Which of the following statements is correct?

Accepted Answer

A)  The $800,000 is unrelated business income. 
B)  The $500,000 of gift shop net income is unrelated business income. 
C)  The $300,000 is unrelated business income because the gift shop is a feeder organization. 
D)  None of the $800,000 is unrelated business income. 
E)  The unrelated business income tax does not apply to churches. 
A)  The $800,000 is unrelated business income. 
B)  The $500,000 of gift shop net income is unrelated business income. 
C)  The $300,000 is unrelated business income because the gift shop is a feeder organization. 
D)  None of the $800,000 is unrelated business income. 
E)  The unrelated business income tax does not apply to churches.

Question 8

Theater, Inc., an exempt organization, owns a printing company, Printers, Inc., which remits 85% of its profits to Theater, Inc. Since Printers remits at least 85% of its profits to Theater, neither Theater, Inc., nor Printers, Inc., must pay income tax on this $85,000 ($100,000 ´ 85%).

Accepted Answer

A) True 
 B)False

Question 9

An exempt organization that is eligible to elect under § 501(h) to engage in lobbying activities on a limited basis incurs no tax liability from lobbying, if the lobbying expenditures for the tax year do not exceed the lobbying expenditures ceiling.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

To satisfy the broadly supported provision to avoid classification as a private foundation, the exempt organization must satisfy both an external support test and an internal support test. Under the internal support test, more than one-third of the exempt organization's support for the taxable year must come from gross investment income and unrelated business taxable income.

Accepted Answer

A) True 
 B)False

Question 12

In calculating unrelated business taxable income, the exempt organization is permitted to deduct only the charitable contributions associated with the unrelated trade or business.

Accepted Answer

A) True 
 B)False

Question 13

An activity is not an unrelated trade or business for purposes of the unrelated business income tax (UBIT) unless it is profitable.

Accepted Answer

A) True 
 B)False

Question 14

The excise tax that is imposed on private foundations for making jeopardizing investments is imposed because the foundation has made speculative investments that put the foundation's income at risk.

Accepted Answer

A) True 
 B)False

Question 15

Watch, Inc., a § 501(c)(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 $9.00 per potential donor. What is the effect of the inclusion of the address labels on Watch's unrelated business income?

Accepted Answer

The address labels are low cost articles

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

Support the Child, Inc., a § 501(c)(3) organization, provides clothing for the children of disabled, low-income taxpayers. All of the clothes are received as contributions from individuals or from a wholly-owned, for-profit subsidiary (Sales, Inc.), which is in the retail clothing business (i.e., clothing that has been in inventory for over 120 days is transferred to Support the Child for distributions to qualified individuals). In addition to the clothing, Sales distributes 75% of its net income each year to Support the Child.

Accepted Answer

The answer of Support the Child, Inc., a § 501(c)(3)...

Question 18

Which of the following statements regarding the disclosure Regulations is correct?

Accepted Answer

A)  Posting the required tax forms on the Internet is an acceptable technique for satisfying the "widely available requirement." 
B)  Forms 990 and 1023 must be readily available to the general public. 
C)  If an individual requests a copy of the required tax forms in writing, the exempt entity must provide a copy within 30 days. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are all correct. 
A)  Posting the required tax forms on the Internet is an acceptable technique for satisfying the "widely available requirement." 
B)  Forms 990 and 1023 must be readily available to the general public. 
C)  If an individual requests a copy of the required tax forms in writing, the exempt entity must provide a copy within 30 days. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are all correct.

Question 19

Woeful, Inc., a tax-exempt organization, leases a building and machinery to Purple Partnership. The rental income from the building is $180,000, with related expenses of $70,000. The rental income from the machinery is $12,000, with related expenses of $3,000. What adjustment must be made to net unrelated business income?

Accepted Answer

The net rental income of $119,000 ($110,

Question 20

Which of the following qualify as exempt organizations?

Accepted Answer

A)  Federal and related agencies. 
B)  Religious, charitable, and educational organizations. 
C)  Civic leagues. 
D)  Domestic fraternal societies (e.g., the Eagles Club). 
E)  All of the above can be exempt from tax. 
A)  Federal and related agencies. 
B)  Religious, charitable, and educational organizations. 
C)  Civic leagues. 
D)  Domestic fraternal societies (e.g., the Eagles Club). 
E)  All of the above can be exempt from tax.

To maintain exempt status, an organization must do which of the following:

Loyal, Inc., is a §501(c)(3) organization that is not classified as a private foundation. During the current year, it is subject to intermediate sanctions. What other options does the IRS have in dealing with an exempt organization engaging in prohibited transactions?

Which of the following are available options for the IRS in dealing with an exempt organization entering into prohibited transactions?

Exempt organizations which are appropriately classified as private foundations include churches, educational institutions, and charitable organizations receiving a major portion of their support from the general public or the U.S., a state, or a political subdivision thereof.

Which of the following statements regarding low-cost articles is correct?

Which of the following exempt organizations are required to file Form 990 (Return of Organization Exempt from Income Tax)?

Theater, Inc., an exempt organization, owns a printing company, Printers, Inc., which remits 85% of its profits to Theater, Inc. Since Printers remits at least 85% of its profits to Theater, neither Theater, Inc., nor Printers, Inc., must pay income tax on this $85,000 ($100,000 ´ 85%).

An exempt organization that is eligible to elect under § 501(h) to engage in lobbying activities on a limited basis incurs no tax liability from lobbying, if the lobbying expenditures for the tax year do not exceed the lobbying expenditures ceiling.

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

In calculating unrelated business taxable income, the exempt organization is permitted to deduct only the charitable contributions associated with the unrelated trade or business.

An activity is not an unrelated trade or business for purposes of the unrelated business income tax (UBIT) unless it is profitable.

The excise tax that is imposed on private foundations for making jeopardizing investments is imposed because the foundation has made speculative investments that put the foundation's income at risk.

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.

Which of the following statements regarding the disclosure Regulations is correct?

Which of the following qualify as exempt organizations?

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S: Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 15: Exempt Entities

To maintain exempt status, an organization must do which of the following:

Loyal, Inc., is a §501(c)(3) organization that is not classified as a private foundation. During the current year, it is subject to intermediate sanctions. What other options does the IRS have in dealing with an exempt organization engaging in prohibited transactions?

Which of the following are available options for the IRS in dealing with an exempt organization entering into prohibited transactions?

Exempt organizations which are appropriately classified as private foundations include churches, educational institutions, and charitable organizations receiving a major portion of their support from the general public or the U.S., a state, or a political subdivision thereof.

Which of the following statements regarding low-cost articles is correct?

Which of the following exempt organizations are required to file Form 990 (Return of Organization Exempt from Income Tax)?

Theater, Inc., an exempt organization, owns a printing company, Printers, Inc., which remits 85% of its profits to Theater, Inc. Since Printers remits at least 85% of its profits to Theater, neither Theater, Inc., nor Printers, Inc., must pay income tax on this $85,000 ($100,000 ´ 85%).

An exempt organization that is eligible to elect under § 501(h) to engage in lobbying activities on a limited basis incurs no tax liability from lobbying, if the lobbying expenditures for the tax year do not exceed the lobbying expenditures ceiling.

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

In calculating unrelated business taxable income, the exempt organization is permitted to deduct only the charitable contributions associated with the unrelated trade or business.

An activity is not an unrelated trade or business for purposes of the unrelated business income tax (UBIT) unless it is profitable.

The excise tax that is imposed on private foundations for making jeopardizing investments is imposed because the foundation has made speculative investments that put the foundation's income at risk.

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.

Which of the following statements regarding the disclosure Regulations is correct?

Which of the following qualify as exempt organizations?

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S: Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters