Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 20% 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 2011.
   Calculate the amount of The Dispensary's unrelated business gross income.

Accepted Answer

For any of the activities of The Dispens

Question 3

Discuss any negative tax consequences that result from an exempt organization being classified as a private foundation.

Accepted Answer

Two potential negative tax consequences

Question 4

Match the following statements with the correct description.

Accepted Answer

The answer of Match the following statements with the correct...

Question 5

A profit-related activity of an exempt organization avoids the unrelated business income tax if greater than 50% of the merchandise sold had been received as a contribution.

Accepted Answer

A) True 
 B)False

Question 6

If an organization qualifies for exempt status for Federal income tax purposes, it is exempt from all Federal income taxes.

Accepted Answer

A) True 
 B)False

Question 7

Teal, Inc., is a private foundation which failed to distribute an adequate amount of income for the exempt purpose of Teal.Which of the following statements is correct?

Accepted Answer

A) An excise tax in the form of an initial tax at the rate of 5% may be imposed on Teal. 
B) An excise tax in the form of an initial tax at the rate of 2.5% may be imposed on the foundation manager. 
C) An excise tax in the form of an additional tax at the rate of 100% may be imposed on Teal. 
D) An excise tax in the form of an additional tax at the rate of 50% may be imposed on the foundation manager. 
E) None of the statements is correct. 
A) An excise tax in the form of an initial tax at the rate of 5% may be imposed on Teal. 
B) An excise tax in the form of an initial tax at the rate of 2.5% may be imposed on the foundation manager. 
C) An excise tax in the form of an additional tax at the rate of 100% may be imposed on Teal. 
D) An excise tax in the form of an additional tax at the rate of 50% may be imposed on the foundation manager. 
E) None of the statements is correct.

Question 8

An exempt organization can avoid classification as a private foundation if it is broadly publicly supported.To be broadly publicly supported, which of the following is required?

Accepted Answer

A) The exempt organization does not receive support from a feeder organization. 
B) An external support test is satisfied. 
C) An internal support test is satisfied. 
D) Only b.and c.must be satisfied. 
E) a., b., and c.must be satisfied. 
A) The exempt organization does not receive support from a feeder organization. 
B) An external support test is satisfied. 
C) An internal support test is satisfied. 
D) Only b.and c.must be satisfied. 
E) a., b., and c.must be satisfied.

Question 9

For purposes of the unrelated business income tax (UBIT), land that is acquired by the exempt organization for later exempt-use is excluded from the definition of debt-financed property if certain requirements are satisfied.Which of the following is not included in the requirements?

Accepted Answer

A) The principal purpose of acquiring the land is for use (substantially all) in achieving the organization's exempt purpose. 
B) The fair market value of the land is not over 50% of the fair market value of land presently owned by the exempt organization. 
C) The use of the land by the exempt organization will begin within ten years of the acquisition date. 
D) At the date the land is acquired, it is located in the neighborhood of other property of the organization for which substantially all the use is for achieving the organization's exempt purpose. 
E) All of the above are requirements. 
A) The principal purpose of acquiring the land is for use (substantially all) in achieving the organization's exempt purpose. 
B) The fair market value of the land is not over 50% of the fair market value of land presently owned by the exempt organization. 
C) The use of the land by the exempt organization will begin within ten years of the acquisition date. 
D) At the date the land is acquired, it is located in the neighborhood of other property of the organization for which substantially all the use is for achieving the organization's exempt purpose. 
E) All of the above are requirements.

Question 10

Plus, Inc., is a § 501(c)(3) organization.It generates a small amount of net income each year.Ralph, the CEO of Plus, Inc., is concerned that Plus may be subject to the unrelated business income tax.Is there a materiality exception to this tax?

Accepted Answer

Yes.The materiality exception

Question 11

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?

Accepted Answer

First, a tax is levied on the

Question 12

Wonder, Inc., a private foundation, makes a speculative investment of $800,000 that puts the foundation assets at risk.Calculate the tax on jeopardizing investments.Assume that corrective action is taken so that the additional tax does not apply.

Accepted Answer

The initial tax on the private

Question 13

Which of the following § 501(c)(3) exempt organizations is appropriately classified as a private foundation?

Accepted Answer

A) First Methodist Church. 
B) University of Richmond. 
C) Williamsburg Community Hospital. 
D) Salvation Army. 
E) None of the above. 
A) First Methodist Church. 
B) University of Richmond. 
C) Williamsburg Community Hospital. 
D) Salvation Army. 
E) None of the above.

Question 14

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?

Accepted Answer

If the following requirements are satisf

Question 15

While certain § 501(c)(3) organizations can elect to be permitted to lobby on a limited basis, churches are not eligible to make a § 501(h) election.

Accepted Answer

A) True 
 B)False

Question 16

Soft, Inc., a § 501(c)(3) organization, has been leasing a building to Ice, Inc., a taxable entity, for 12 years.The lease terminates in the current tax year.Soft's adjusted basis for the building is $350,000.It sells the building to the Realty Partnership, a taxable entity, for $625,000.Selling expenses are $37,500.

Accepted Answer

The answer of Soft, Inc., a § 501(c)(3) organization, has...

Question 17

City, Inc., an exempt organization, has included among other amounts the following in calculating net unrelated business income of $500,000.
   The only expenses incurred associated with these items are rental expenses (which includes depreciation of $10,000) of $15,000.Calculate City, Inc.'s UBTI.

Accepted Answer

@#IMG-DLM& The net rental income from th

Question 18

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.

Accepted Answer

The answer of Help, Inc., a tax-exempt organization, incurs lobbying...

Question 19

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 20

George is running for mayor of Culpepper. The members of Third Church adamantly oppose his candidacy. They would like to run a political advertisement in the local newspaper opposing his candidacy. The newspaper ad would have no effect on Third Church's exempt status because the ad opposes George; it does not support his opponent.

Accepted Answer

A) True 
 B)False

Exam 23: Exempt Entities

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

Discuss any negative tax consequences that result from an exempt organization being classified as a private foundation.

Match the following statements with the correct description.

A profit-related activity of an exempt organization avoids the unrelated business income tax if greater than 50% of the merchandise sold had been received as a contribution.

If an organization qualifies for exempt status for Federal income tax purposes, it is exempt from all Federal income taxes.

Teal, Inc., is a private foundation which failed to distribute an adequate amount of income for the exempt purpose of Teal.Which of the following statements is correct?

An exempt organization can avoid classification as a private foundation if it is broadly publicly supported.To be broadly publicly supported, which of the following is required?

For purposes of the unrelated business income tax (UBIT), land that is acquired by the exempt organization for later exempt-use is excluded from the definition of debt-financed property if certain requirements are satisfied.Which of the following is not included in the requirements?

Plus, Inc., is a § 501(c)(3) organization.It generates a small amount of net income each year.Ralph, the CEO of Plus, Inc., is concerned that Plus may be subject to the unrelated business income tax.Is there a materiality exception to this tax?

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?

Wonder, Inc., a private foundation, makes a speculative investment of $800,000 that puts the foundation assets at risk.Calculate the tax on jeopardizing investments.Assume that corrective action is taken so that the additional tax does not apply.

Which of the following § 501(c)(3) exempt organizations is appropriately classified as a private foundation?

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?

While certain § 501(c)(3) organizations can elect to be permitted to lobby on a limited basis, churches are not eligible to make a § 501(h) election.

City, Inc., an exempt organization, has included among other amounts the following in calculating net unrelated business income of $500,000. The only expenses incurred associated with these items are rental expenses (which includes depreciation of $10,000) of $15,000.Calculate City, Inc.'s UBTI.

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.

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.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S: Corporations

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

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