Question 1

Define "trade or business" for purposes of the unrelated business income tax (UBIT).

Accepted Answer

The answer of Define "trade or business" for purposes of...

Question 2

Define a private foundation.

Accepted Answer

The answer of Define a private foundation....

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Match the following statements.
-Form 990.

Accepted Answer

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.

Question 5

Match the following statements.
-Bingo games

Accepted Answer

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.

Question 6

The unrelated business income tax (UBIT) is calculated by multiplying unrelated business taxable income by the highest corporate tax rate.

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

Match the following statements.
-Membership lists

Accepted Answer

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.

Question 9

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 carefully 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. $\begin{array}{lr}
\text { Medicine dispensed to hospital patients } & \$ 900,000 \
\text { Medicine sal es to former patients } & 100,000
\end{array}$ ​
Calculate the amount of The Dispensary's unrelated business income.

Accepted Answer

The answer of The Dispensary is a pharmacy that is...

Question 10

Well, Inc., a private foundation, makes a speculative investment of $400,000 that puts the foundation assets at risk. Calculate the tax on jeopardizing investments. Assume that corrective action is taken so that the additional tax does not apply.

Accepted Answer

The answer of Well, Inc., a private foundation, makes a...

Question 11

If personal property is leased with real property and more than 45% of the rent income under the lease is from personal property, all of the rent income is subject to the unrelated business income tax.

Accepted Answer

A) True 
 B)False

Question 12

General requirements for exempt status include the organization serving the common good and the organization being a not-for-profit entity.

Accepted Answer

A) True 
 B)False

Question 13

Match the following statements.
-Branded calendars

Accepted Answer

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.

Question 14

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

Accepted Answer

The answer of What are intermediate sanctions and to what...

Question 15

Identify the components of the tax model for unrelated business taxable income.

Accepted Answer

The answer of Identify the components of the tax model...

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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.

Accepted Answer

The answer of Plus, Inc., is a § 501(c)(3) organization....

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

What tax forms are used to apply for exempt status?

Accepted Answer

The answer of What tax forms are used to apply...

Question 20

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).

Accepted Answer

A) True 
 B)False

Exam 15: Exempt Entities

Define "trade or business" for purposes of the unrelated business income tax (UBIT).

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.

Match the following statements. -Form 990.

Match the following statements. -Bingo games

The unrelated business income tax (UBIT) is calculated by multiplying unrelated business taxable income by the highest corporate tax rate.

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.

Match the following statements. -Membership lists

Well, Inc., a private foundation, makes a speculative investment of $400,000 that puts the foundation assets at risk. Calculate the tax on jeopardizing investments. Assume that corrective action is taken so that the additional tax does not apply.

If personal property is leased with real property and more than 45% of the rent income under the lease is from personal property, all of the rent income is subject to the unrelated business income tax.

General requirements for exempt status include the organization serving the common good and the organization being a not-for-profit entity.

Match the following statements. -Branded calendars

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

Identify the components of the tax model for unrelated business taxable income.

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

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

What tax forms are used to apply for exempt status?

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).