Exam 15: Exempt Entities

The Dispensary is a pharmacy that is part of a § 501(c)(3)hospital.Its primary mission is to dispense medicines for hospital patients.In addition,the pharmacy dispenses medicines to former hospital patients for a period of up to 30 days after discharge from the hospital.It does this for the dual purpose of convenience to the former patients (i.e. ,the closest pharmacy is 6 miles away),and to ensure that the former patients receive the medicines that have been prescribed for them.

Which of the following statements is/are correct with respect to the unrelated business income tax (UBIT)?

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.

Which of the following activities is not subject to the feeder organization rules?

City,Inc. ,an exempt organization,has included among other amounts the following in calculating net unrelated business income of $500,000. The only expenses incurred associated with these items are rental expenses (which includes depreciation of $10,000)of $15,000.Calculate City,Inc.'s UBTI.

Personal property rental income is subject to and real property rental income is not subject to 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.

Wett,Inc. ,a § 501(c)(3)exempt organization,acquired all the stock of a for-profit corporation for $150,000.Wett 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.

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?

Which exempt organizations are not required to file an annual Federal tax return?

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

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.

Which of the following requirements must be satisfied for an organization to be subject to the unrelated business income tax (UBIT)?

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

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

Soft,Inc. ,a § 501(c)(3)organization,has been leasing a building to Ice,Inc. ,a taxable entity,for 12 years.The lease terminates in the current tax year.Soft's adjusted basis for the building is $350,000.It sells the building to the Realty Partnership,a taxable entity,for $625,000.Selling expenses are $37,500.

Loyal,Inc. ,is a §501(c)(3)organization that is not classified as a private foundation.During the current year,it is subject to intermediate sanctions.What other options does the IRS have in dealing with an exempt organization engaging in prohibited transactions?

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?

Are some exempt organizations eligible to be recipients of contributions for which the donor does not qualify for a charitable contribution deduction?

A profit-related activity of an exempt organization avoids the unrelated business income tax if greater than 50% of the merchandise sold had been received as a contribution.