Exam 23: Exempt Entities

In calculating unrelated business taxable income, the exempt organization is permitted to deduct only the charitable contributions associated with the unrelated trade or business.

Fourth Church operates a gift shop in its parish house.The total income of the church is $900,000.Of this amount, $400,000 comes from offerings and $500,000 comes from the net income of the gift shop.The gift shop operations are conducted by one full-time employee (the manager) and 50 volunteers.None of the volunteers works more than 15 hours per week.Which of the following statements is correct?

Which of the following are qualified corporate sponsorship payments?

Which of the following are organizations exempt under § 501(c)(3)?

Are organizations that qualify for exempt organization status completely exempt from Federal income taxation?

All organizations that are exempt from Federal income tax are exempt under § 501(c)(3).

If an exempt organization conducts a trade or business that is regularly carried on by the organization, it is subject to the unrelated business income tax (UBIT).

For purposes of the unrelated business income tax, debt-financed property is all property of the exempt organization that is held to produce income and on which there is acquisition indebtedness.

A trade or business that is operated by an exempt organization which otherwise would be subject to the tax on unrelated business income is exempt from tax, if the profits generated by the trade or business are used by the exempt organization for exempt purposes.

An activity is not an unrelated trade or business for purposes of the unrelated business income tax (UBIT) unless it is profitable.

Discuss benefits for which an exempt organization may be eligible, other than exemption from Federal income tax.

Spirit, Inc., a § 501(c)(3) organization, is classified as a private foundation.It has investment income of $150,000.Calculate Spirit's tax on its investment income.

Personal property rental income is subject to and real property rental income is not subject to the unrelated business income 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?

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).

What tax forms are used to apply for exempt status?

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

Nice, Inc., a § 501(c)(3) organization, inherited 100% of the stock of Aggressive, Inc., a for-profit entity, at the beginning of the year.Although Nice plans on selling the stock of Aggressive, a buyer has not yet been located.Aggressive's taxable income for the year is $600,000.Aggressive distributed a dividend of $450,000 to Nice at the beginning of December.Determine the tax consequences for the taxable income and the dividend payment to Aggressive, Inc.

An exempt entity in no circumstance is subject to Federal income tax.

Which of the following activities, whose proceeds benefit an exempt organization, are subject to the feeder organization rules?