Exam 15: Exempt Entities

An eligible § 501(c)(3) organization has made the § 501(h) election to participate in lobbying on a limited basis. If the ceiling on lobbying established in § 501(h) (lobbying nontaxable amount) is exceeded, what are the potential tax consequences to the exempt organization?

Which of the following statements regarding intermediate sanctions is correct?

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 $600,000 per year and that from the related machinery is $90,000 per year. Expenses incurred by Arbor for the land and building during the year are $65,000 and those for the machinery are $38,000. Net unrelated business income, which includes the above rental income and expenses, is $850,000. Calculate Arbor's unrelated business taxable income.

The excise tax imposed on a private foundation's excess business holdings is in effect an audit fee to defray IRS expenses.

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

A § 501(c)(5) labor organization is prohibited from lobbying for or against the passage of legislation.

A trade or business that is operated by an exempt organization which otherwise would be subject to the tax on unrelated business income is exempt from tax, if the profits generated by the trade or business are used by the exempt organization for exempt purposes.

For an activity to be considered as regularly carried on for purposes of the unrelated business income tax, the activity must be conducted during the work week (i.e., activities performed on the weekend are not considered in determining if the activity is regularly carried on).

The League of Women Voters is a § 501(c)(3) organization.

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

Which of the following statements is not correct?

Acquisition indebtedness consists of the unpaid amounts of which of the following for debt-financed property?

Which of the following are organizations exempt under § 501(c)(3)?

Even though a church is not required to obtain IRS approval of its exempt status, it still must file Form 990 (Return of Organization Exempt from Income Tax) annually.

Which of the following types of § 501(c)(3) organizations are not private foundations?

Under what circumstances are bingo games not treated as an unrelated trade or business?

An exempt entity in no circumstance is subject to Federal income tax.

Are organizations that qualify for exempt organization status completely exempt from Federal income taxation?

An exempt organization is located in the state of Nevada. Gambling in Nevada is legal. Therefore, bingo games are conducted by both taxable and tax-exempt organizations. If the net earnings from the bingo games are less than $25,000, the exempt organization is not subject to the unrelated business income tax (UBIT).

The purpose of the excise tax imposed on a private foundation for failure to distribute sufficient levels of income is to motivate the foundation to distribute more of its income for application to exempt purposes and thus be classified as a feeder organization.