Exam 23: Exempt Entities

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 requirements must be satisfied for an organization to be subject to the unrelated business income tax (UBIT)?

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%).

Which of the following taxes that are imposed on private foundations is, effectively, an audit fee to defray IRS expenses?

Medical, Inc., a § 501(c)(3) exempt organization, engages in an excess benefit transaction.The amount of the excess benefit is $200,000.For the organization management, the participation in the excess benefit transaction was not willful and was due to reasonable cause.Calculate the amount of the excise tax (first-level tax) imposed under the intermediate sanctions provision.

Which of the following activities is not subject to the feeder organization rules?

Relevant factors in the unrelated business income tax (UBIT) rules for determining whether a trade or business is regularly carried on by an exempt organization do not include which of the following?

Radio, Inc., an exempt organization, trains disabled individuals to be radio announcers.Rather than hold a traditional graduation exercise, the graduates compete in a radio announcer 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 Radio's unrelated business income from this activity.

Rose, Inc., a qualifying § 501(c)(3) organization, incurs lobbying expenditures of $145,000 during the taxable year. Exempt purpose expenditures are $500,000. If Rose makes the election under § 501(h) to make lobbying expenditures on a limited basis, its tax liability resulting from the lobbying expenditures is:

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

A § 501(c)(3) organization exchanges its membership lists with another exempt organization.What are the Federal income tax consequences?