Exam 23: Exempt Entities

The trade or business of selling merchandise where substantially all of the merchandise has been received as contributions or gifts is not subject to the unrelated business income tax.

If an exempt organization is required to file an annual information return, on what form is it filed? Be specific.

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. -The trade or business consists of selling merchandise, and substantially all of the merchandise has been received as gifts or contributions.

What tax forms are used to apply for exempt status? Be specific.

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 excess business holdings

Which of the following is a requirement 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?

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)(6) business league

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

Engaging in a prohibited transaction can result in an exempt organization being subject to Federal income tax, but such an act cannot cause the entity to lose its exempt status unless the exempt organization repeats the prohibited transaction.

Which of the following is not an example of an exempt organization?

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

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 1024

A feeder organization is exempt from Federal income taxation because it carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt entity.

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)(3) organization

If an exempt organization conducts a trade or business that consists of either exchanging or renting to other exempt organizations the organization's donor or membership list, such trade or business is an unrelated trade or business.

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?

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?

To satisfy the "not for profit" requirement for exempt status, the entity may not be engaged in a trade or business.

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.

Define a qualified corporate sponsorship payment.