Question 1

A profit-related activity of an exempt organization avoids the unrelated business income tax if greater than 50% of the merchandise sold had been received as a contribution.

Accepted Answer

A) True 
 B)False

Question 2

Warmth, Inc., a private foundation, makes an expenditure of $800,000 that should not be made by a private foundation.Calculate the tax on taxable expenditures.Assume that corrective action is taken so that the additional tax does not apply.

Accepted Answer

The answer of Warmth, Inc., a private foundation, makes an...

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Wonder, Inc., a private foundation, makes a speculative investment of $800,000 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 Wonder, Inc., a private foundation, makes a...

Question 5

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 6

Which of the following statements is correct?

Accepted Answer

A) A private foundation is, in general, exempt from Federal income tax. 
B) A private foundation may be subject to certain types of Federal income tax. 
C) If a broad public support test is satisfied, an exempt organization that otherwise would be classified as a private foundation is not classified as a private foundation. 
D) Only b.and c.are correct. 
E) a., b., and c.are correct.

Question 7

While certain § 501(c)(3) organizations can elect to be permitted to lobby on a limited basis, churches are not eligible to make a § 501(h) election.

Accepted Answer

A) True 
 B)False

Question 8

An exempt organization can avoid classification as a private foundation if it is broadly publicly supported.To be broadly publicly supported, which of the following is required?

Accepted Answer

A) The exempt organization does not receive support from a feeder organization. 
B) An external support test is satisfied. 
C) An internal support test is satisfied. 
D) Only b.and c.must be satisfied. 
E) a., b., and c.must be satisfied.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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?

Accepted Answer

A) $57,500. 
B) $65,250. 
C) $66,000. 
D) $72,500. 
E) Some other amount.

Question 11

The excise tax imposed on a private foundation's investment income can be imposed as an initial (first-level) tax but cannot be imposed as an additional (second-level) tax.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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?

Accepted Answer

The answer of Which requirements must be satisfied for an...

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

The answer of If an exempt organization is required to...

Question 16

Which of the following are available options for the IRS in dealing with an exempt organization entering into prohibited transactions?

Accepted Answer

A) Attempt to subject all or part of the organization's income to Federal income tax. 
B) Revoke the exempt status of the organization. 
C) Impose intermediate sanctions in the form of threatened loss of exempt status. 
D) Only a.and b. 
E) a., b., and c.

Question 17

Assist, Inc., a § 501(c)(3) organization, receives the following sources of support during the tax year.
  Is Assist, Inc., classified as a private foundation?

Accepted Answer

The answer of Assist, Inc., a § 501(c)(3) organization, receives...

Question 18

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?

Accepted Answer

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

Question 19

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 20

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

Accepted Answer

A) Under certain circumstances, a corporate sponsorship payment can be classified as not being an unrelated trade or business. 
B) Under certain circumstances, a casino game can be classified as not being an unrelated trade or business. 
C) Under certain circumstances, the exchanging or renting of membership lists to other exempt organizations can be classified as not being an unrelated trade or business. 
D) Only a.and c.are correct. 
E) a., b., and c.all are correct.

Exam 23: Exempt Entities

A profit-related activity of an exempt organization avoids the unrelated business income tax if greater than 50% of the merchandise sold had been received as a contribution.

Warmth, Inc., a private foundation, makes an expenditure of $800,000 that should not be made by a private foundation.Calculate the tax on taxable expenditures.Assume that corrective action is taken so that the additional tax does not apply.

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

Wonder, Inc., a private foundation, makes a speculative investment of $800,000 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.

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

Which of the following statements is correct?

While certain § 501(c)(3) organizations can elect to be permitted to lobby on a limited basis, churches are not eligible to make a § 501(h) election.

An exempt organization can avoid classification as a private foundation if it is broadly publicly supported.To be broadly publicly supported, which of the following is required?

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

The excise tax imposed on a private foundation's investment income can be imposed as an initial (first-level) tax but cannot be imposed as an additional (second-level) tax.

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

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?

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

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

Which of the following are available options for the IRS in dealing with an exempt organization entering into prohibited transactions?

Assist, Inc., a § 501(c)(3) organization, receives the following sources of support during the tax year. Is Assist, Inc., classified as a private foundation?

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?

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