Exam 15: Exempt Entities

Warmth, Inc., a private foundation, makes an expenditure of $800,000 that should not be made by a private foundation. Calculate the tax on taxable expenditures. Assume that corrective action is taken so that the additional tax does not apply.

Match the following statements with the correct description. -Feeder organization

§ 501(c)(5) labor organization

Which of the following attributes are associated with exempt organizations?

The due date for the Exempt Organization Business Income Tax Return (Form 990-T) is the fifteenth day of the third month after the end of the taxable year.

Match the following statements with the correct description. -§ 501(h)

Which of the following statements regarding the unrelated business income tax is not correct?

Discuss the relationship between the qualification requirements for exempt status and the maintenance requirements.

Ice, Inc., a § 501(c)(3) organization, has been leasing a building to Soft, Inc., a taxable entity, for 15 years. The lease terminates in the current tax year. Ice's adjusted basis for the building is $225,000. It sells the building to the Development Partnership, a taxable entity, for $440,000. Selling expenses are $26,400. a. Calculate the effect of the sale on Ice's UBTI. b. Assume instead that Development Partnership is a tax-exempt entity. Calculate the effect of the sale on Ice's UBTI.

While the major objective of the Federal income tax law is to raise revenue, social considerations and economic objectives also affect the tax law.

What is the purpose of the "broadly supported" exception for an exempt organization being classified as a private foundation?

A private foundation is subject to which of the following taxes?

Which of the following are qualified corporate sponsorship payments?

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 one­third of the exempt organization's support for the taxable year must come from gross investment income and unrelated business taxable income.

Wonder, Inc., a § 501(c)(3) exempt organization, acquired all the stock of a for­profit corporation for $100,000. Wonder is a private foundation. The acquired corporation was not a related business. Calculate the tax on excess business holdings. Assume that corrective action is taken so that the additional tax does not apply.

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

All of the stock of Hot Dog, Inc., a fast food franchise operating in 9 southeastern states, is owned by Welcome America, Inc., a § 501(c)(3) organization. The stock was received last year as an inheritance from Rob, the entrepreneur who founded the chain. During the current year, Hot Dog reports profits before taxes (this is the same as taxable income) of $8 million. Hot Dog distributes $5 million to its parent, and it retains the balance for expansion purposes. a. What are the tax consequences to Hot Dog and to Welcome America? a. change if Hot Dog distributes $8 million to Welcome America, rather than $5 million? b. How would your answer in

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.

Match the following statements. -Form 990.

Amber, Inc., an exempt organization, reports unrelated business taxable income of $300,000. Total charitable contributions are $35,000, of which $31,000 (associated with the unrelated trade or business) has been deducted in calculating net unrelated business income. Calculate Amber's positive and negative adjustments in calculating unrelated business taxable income.