Exam 15: Exempt Entities

Unrelated debt-financed income,net of the unrelated debt-financed deductions,is subject to the unrelated business income tax only if the exempt organization is a private foundation.

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?

What tax forms are used to apply for exempt status?

Assist,Inc. ,a § 501(c)(3)organization,receives the following sources of support during the tax year. Is Assist,Inc. ,classified as a private foundation?

Lemon,Inc. ,a private foundation,engages in a transaction with a disqualified person in the amount of $300,000.Calculate the tax on self-dealing.Assume that corrective action is taken so that the additional tax does not apply.

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.

What income and activities are not subject to the feeder organization rules?

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

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

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

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).

An educational organization such as the College of William and Mary that is exempt under § 501(c)(3)cannot be classified as a private foundation if its only sources of revenue are from tuition and alumni contributions.

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.

Which of the following statements is incorrect?

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

The excise tax that is imposed on private foundations for making jeopardizing investments is imposed because the foundation has made speculative investments that put the foundation's income at risk.

Watch,Inc. ,a § 501(c)(3)exempt organization,solicits contributions through a mail campaign.An executive,who recently completed an executive MBA degree program,recommends that personal address labels be included as an additional way to motivate the potential donor to contribute.The value of these labels is $9.00 per potential donor.What is the effect of the inclusion of the address labels on Watch's unrelated business income?

An exempt organization that otherwise would be classified as an unrelated trade or businesses will not be subject to the unrelated business income tax if the individuals performing substantially all the work of the trade or business do so without compensation.

The activity of exchanging with or renting to other exempt organizations the exempt organization's donor or membership list is not an unrelated trade or business.

Robin,Inc. ,an exempt organization,acquired a building for $500,000 which it will lease to XYZ,Inc. ,for $35,000 annually.To finance the acquisition of the building,Robin secures a mortgage on it of $312,500.Advise Robin as to whether it has any unrelated debt-financed income or deductions.