Exam 23: Exempt Entities

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?

Which of the following is a requirement for exempt status?

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.

Francis is the CEO of Give, Inc., a § 501(c)(3) organization.Francis informs you that the will of a major donor transfers 100% of the stock of Friendly Hot Dogs to Give, Inc.Since Friendly is a profitable entity, Francis would like for Give to continue to own and operate Friendly Hot Dogs.You inform Francis that Friendly would be a feeder organization.Describe for the CEO what a feeder organization is and how it is taxed.

Match the following statements.

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.

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

Agnes is aware that a feeder organization is subject to Federal income taxation.She wonders whether an organization otherwise taxable as a feeder organization can avoid such status if it remits less than 80% of its profits to the § 501(c)(3) entity.

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 are exempt organizations to which contributions made are eligible for the charitable contribution deduction?

Robin, Inc., a tax-exempt organization, leases a building and equipment to XYZ Corporation. The rental income from the building is $480,000 and from the equipment is $36,000. Rental expenses are $300,000 for the building and $33,000 for the equipment. What adjustment must be made to net unrelated business income?

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.

All exempt organizations which are subject to the unrelated business income tax must file Form 990-T (Exempt Organization Business Income Tax Return).

Hope, Inc., an exempt organization, owns a factory building that it leases to a taxable corporation for $160,000 per year.Related expenses for Hope are $40,000.Hope's average acquisition indebtedness on the building is $600,000 and the average adjusted basis is $800,000.Calculate Hope's unrelated debt-financed income and expenses.Then indicate the effect of these items on unrelated business taxable income.

Which of the following is not an example of an exempt organization?

If an exempt organization distributes "low-cost items" as an incidental part of its solicitation for charitable contributions, the distribution is not considered an unrelated trade or business.

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

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?

Blue, Inc., receives its support from the following sources. Which of the following statements is correct?

Which of the following statements is correct?