Exam 23: Exempt Entities

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

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? b. How would your answer in a. change if Hot Dog distributes $8 million to Welcome America, rather than $5 million?

Which of the following statements is correct?

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. -Unrelated business income is generally that derived from the unrelated trade or business, reduced by the deductions directly connected with the conduct of the unrelated trade or business.

For an exempt organization to be subject to the unrelated business income tax, the trade or business must not be substantially related to the exempt purpose of the organization.

Ballet's lobbying nontaxable amount is $600,000. Its lobbying expenditures ceiling is:

To be classified as a private foundation, the exempt status of an organization can be provided under either § 501(c) (1) or § 501(c)(3).

Which of the following statements is correct?

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.

Which of the following statements is correct regarding the unrelated business income tax (UBIT)?

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

The due date for the Exempt Organization Business Income Tax Return (Form 990-T) is the fifteenth day of the third month after the end of the taxable year.

A § 501(c)(3) organization that otherwise would be classified as a private foundation can avoid such classification if it satisfies:

While the major objective of the Federal income tax law is to raise revenue, social considerations and economic objectives also affect the tax law.

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

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 three of the five previous years.

Which of the following statements regarding intermediate sanctions is correct?

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

All exempt organizations which are subject to the unrelated business income tax must file Form 990-T (Exempt Organization Business Income Tax Return).

Define a private foundation.