Exam 23: Exempt Entities

Which of the following excise taxes are imposed on private foundations?

An eligible § 501(c)(3) organization has made the § 501(h) election to participate in lobbying on a limited basis.If the lobbying nontaxable amount is exceeded,what are the potential tax consequences to the exempt organization?

Match the following statements. a.Exempt from tax on unrelated business. b.Inappropriate definition. c.Exempt organization may be subject to the tax on unrelated business income. d.Annual information return of an exempt organization that is required to file a return and which is not a private foundation. e.Appropriate definition. f.Annual information return of a private foundation. -Form 990.

The income from a bingo game or a casino game conducted by an exempt organization may be unrelated business income.

A corporate sponsorship payment that is contingent on attendance at a sporting event increases the recipient's unrelated business income.

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

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 jeopardizing investments

Match the following statements. a.Distribution of such items is not considered an unrelated trade or business if they are "low-cost items". b.Is considered an unrelated trade or business if the amount received is contingent upon the level of attendance at one or more events c.Is considered an unrelated trade or business if legally it can be conducted by commercial (for-profit) entities. d.A trade or business that consists of either renting or exchanging these with another exempt organization is not an unrelated trade or business. -Branded calendars

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.

For purposes of the unrelated business income tax (UBIT),a trade or business consists of any activity conducted for the production of income through the sale of merchandise,or from the performance of services for which profits have been earned during at least two of the five previous years.

An exempt entity is not subject to any Federal income tax.

Which of the following statements is correct?

What are intermediate sanctions and to what types of exempt organizations do they apply?

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

All of the stock of Hot Dog,Inc.,a fast food franchise operating in 9 southeastern states,is owned by Welcome America,Inc.,a § 501(c)(3) organization.The stock was received last year as an inheritance from Rob,the entrepreneur who founded the chain. During the current year,Hot Dog reports profits before taxes and taxable income of $8 million.Hot Dog distributes $5 million to its parent,and it retains the balance for expansion purposes. a. What are the tax consequences to Hot Dog and to Welcome America? a. change if Hot Dog distributes $8 million to Welcome America, rather than $5 million? b. How would your answer in

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

What tax forms are used to apply for exempt status?

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. The Dispensary carries out the policy of the hospital board that no more than 25% of its gross revenues come from former-patient medicine sales.If necessary,in December of each year,sales to former patients are curtailed to assure compliance with this policy.Sales revenue from each of the two sources is as follows for the tax year. ​ Calculate the amount of The Dispensary's unrelated business income.

Tan,Inc.,a tax-exempt organization,has $65,000 of net unrelated business income.Total charitable contributions (all associated with the unrelated trade or business) are $7,500.Assuming that the $7,500 was deducted in calculating net unrelated business income,what is Tan's unrelated business taxable income?

First Americans,Inc.,a § 501(c)(3) organization,operates a museum which depicts the lives of a tribe of Native Americans.It charges an admission fee,but also finances its operations through endowment income,contributions,and gift shop sales.The gift shop is operated by 50 volunteers and the museum is operated by 15 employees.Revenue by source is: ​ a.Determine the amount of First Americans' unrelated business income (UBI). b.Determine the amount of First American's unrelated business income tax (UBIT).