Exam 23: Exempt Entities

Unless the "widely available" provision is satisfied,a § 501(c)(3)exempt organization (excluding churches and private foundations)must make copies of the following available to the general public: Form 990 (Return of Organization Exempt from Income Tax)and Form 1023 [Application for Recognition of Exemption under § 501(c)(3)] or Form 1024 [Application for Recognition of Exemption under § 501(a)].

An exempt organization owns a building for which its adjusted basis is $100,000 at the beginning of the year and $90,000 at the end of the year.One-half of the ground floor is leased to a commercial venture for $10,000 per year.The remainder of the first floor and all of the second floor are used by the exempt organization in carrying out its mission.When the exempt organization constructed the building 20 years ago,it incurred a mortgage of $150,000.The final payment of this mortgage was made in December of the current year.The average acquisition indebtedness for the current year is $30,000.Determine to what extent the building is debt-financed property,the amount of debt-financed income,and the portion of debt-financed income that is treated as unrelated business income.

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).

The excise tax imposed on a private foundation's excess business holdings is in effect an audit fee to defray IRS expenses.

Which of the following statements are correct?

Which of the following are exempt organizations?

What is the purpose of the unrelated business income tax?

If personal property is leased with real property and more than 50% of the rent income under the lease is from personal property,all of the rent income is subject to the unrelated business income tax.

Which of the following statements regarding a private foundation is not correct?

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

What are the common characteristics of organizations that receive exempt status?

Exempt organizations which are appropriately classified as private foundations include churches,educational institutions,and charitable organizations receiving a major portion of their support from the general public or the U.S. ,a state,or a political subdivision thereof.

Which of the following statements are correct with respect to the unrelated business income tax?

Under certain circumstances,an organization that labels itself as a church may not qualify as an exempt organization.

Rose,Inc. ,a qualifying § 501(c)(3)organization,incurs lobbying expenditures of $145,000 during the taxable year.Exempt purpose expenditures are $500,000.If Rose makes the election under § 501(h)to make lobbying expenditures on a limited basis,its tax liability resulting from the lobbying expenditures is:

Why are some organizations exempt from Federal income tax?

What tax forms are used to apply for exempt status?

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.

An organization that is a for-profit entity can partially qualify for exempt status.

If an organization qualifies for exempt status for Federal income tax purposes,it is exempt from all Federal income taxes.