Exam 23: Exempt Entities

Why are some organizations exempt from Federal income tax?

Give an example of the indicated types of exempt organizations. a.League of Women Voters. b.Teachers' association. c.American Plywood Association. d.Six Flags over Texas theme park. e.Salvation Army. -§ 501(c)(4) civic league

Which of the following requirements must be satisfied for a bingo game to be classified as not being an unrelated trade or business?

Define a qualified corporate sponsorship payment.

Federal agencies exempt from Federal income tax under § 501(c)(1) are not subject to the unrelated business income tax (UBIT).

Third Church operates a gift shop in its parish house.The total income of the church is $800,000.Of this amount,$300,000 comes from offerings and $500,000 comes from the net income of the gift shop.The gift shop operations are conducted by six full-time,paid employees.Which of the following statements is correct?

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

Give an example of the indicated types of exempt organizations. a.League of Women Voters. b.Teachers' association. c.American Plywood Association. d.Six Flags over Texas theme park. e.Salvation Army. -Not an exempt organization

Plus,Inc.,is a § 501(c)(3) organization.It generates a small amount of net income each year.Ralph,the CEO of Plus,Inc.,is concerned that Plus may be subject to the unrelated business income tax.Is there a materiality exception to this tax? A 501(c)(3) with "net income" does not automatically result in a UBIT classification.They must be conducting a trade or business that is regularly carried on and that is not substantially related to its exempt purpose.

Spirit,Inc.,a § 501(c)(3) organization,is classified as a private foundation.It reports investment income of $175,000.Calculate Spirit's tax on its investment income.

Match the following tax forms. a.Return of Private Foundation. b.Application for Recognition of Exemption under § 501(c)(3). c.Return of Organization Exempt from Income Tax. d.Application for Recognition of Exemption under § 501(a). -Form 1023

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

Define a private foundation.

Some of the excise taxes which may be imposed on private foundations may be imposed on both the private foundation and the foundation manager.

For each of the following taxes which are imposed on private foundations and/or Foundation Managers, match the appropriate initial tax or additional tax. a.10% initial tax and 25% additional tax on private foundation. b.30% initial tax and 100% additional tax on private foundation. c.10% initial tax and 200% additional tax on private foundation. d.10% initial tax and 100% additional tax on disqualified person. e.​10% initial tax and 200% additional tax on the disqualified person. -Tax on failure to distribute adequate amounts of income

A § 501(c)(3) exempt organization (excluding churches and private foundations) must make available to the general public its current Form 990.

Match the following statements. a.May be subject to some Federal income taxation and classification may adversely affect amount of charitable contributions received. b.Tax imposed for engaging in transactions with disqualified persons. c.Tax imposed for making investments that are too risky. d.Tax imposed on investments that enable a private foundation to control unrelated for-profit businesses. -Private foundation

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

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 $9.95 per potential donor.What is the effect of the inclusion of the address labels on Watch's unrelated business income?

An intermediate sanction imposed by the IRS on an exempt organization is a greater sanction than revocation of exempt status.