Exam 15: Exempt Entities

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.

What are the excise taxes imposed on private foundations, and why are they imposed?

Restful, Inc., a § 501(c)(3) exempt organization, hires a registered lobbyist to promote its position on pending legislation. For the year, its lobbying expenses are $100,000. Restful makes the § 501(h) election. Assume the lobbying nontaxable amount is $90,000. a. Will the lobbying expenses result in Restful losing its exempt status? b. Calculate the amount of any tax that Restful must pay associated with the lobbying expenses.

Tax on excess business holdings

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

Which of the following is one of the requirements that will enable mortgaged land acquired by an exempt organization for later exempt use to be excluded from debt-financed property, for purposes of the unrelated business income tax?

Miracle, Inc., is a § 501(c)(3) organization involved in medical research. Based on its expectation that proposed legislation will adversely affect the funding supporting its mission, Miracle hires a lobbyist to work in Washington to represent its views. Miracle is eligible for and thus makes the § 501(h) election. It calculates the lobbying nontaxable amount to be $100,000 ($500,000 exempt purpose expenditures × 20%). The total lobbying expenditures for the year were $115,000. Calculate Miracle's tax on excess lobbying expenditures.

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?

Define a private foundation.

A § 501(c)(3) organization that otherwise would be classified as a private foundation can avoid such classification if it satisfies:

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).

Which of the following statements is correct regarding the unrelated business income tax (UBIT)?

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

If personal property is leased with real property and more than 45% of the rent income under the lease is from personal property, all of the rent income is subject to the unrelated business income tax.

Which of the following are consequences of tax-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

Garden, Inc., a qualifying § 501(c)(3) organization, incurs lobbying expenditures of $210,000 during the taxable year. Exempt purpose expenditures are $900,000. If Garden makes the election under § 501(h) to make lobbying expenditures on a limited basis, its tax liability resulting from the lobbying expenditures is:

Even though a church is not required to obtain IRS approval of its exempt status, it still annually must file a Form 990.

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

The tax consequences to a donor of making a charitable contribution to an exempt organization classified as a private foundation may be less favorable than the tax consequences to a donor of making a charitable contribution to an exempt organization that is not classified as a private foundation.