Question 1

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.

Accepted Answer

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

Question 2

Which of the following statements is/are correct with respect to the unrelated business income tax (UBIT)?

Accepted Answer

A) The UBIT does not apply if the business is staffed by volunteers. 
B) The UBIT does not apply if all of the products sold by the business are donated. 
C) The UBIT does not apply if the gross profit margin is not greater than the highest corporate tax rate. 
D) Only a.and b.are correct. 
E) a. ,b. ,and c.are all correct.

Question 3

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 4

Which of the following activities is not subject to the feeder organization rules?

Accepted Answer

A) At least 80% of the net income of the for-profit entity is contributed to the exempt organization for a consecutive three-year period. 
B) A trade or business where substantially all the work is performed by volunteers. 
C) A trade or business of selling merchandise where substantially all of the merchandise has been received as contributions or gifts. 
D) Only b.and c. 
E) a. ,b. ,and c.

Question 5

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.

Accepted Answer

The answer of City,Inc. ,an exempt organization,has included among other...

Question 6

Personal property rental income is subject to and real property rental income is not subject to the unrelated business income tax.

Accepted Answer

A) True 
 B)False

Question 7

Miracle,Inc. ,is a § 501(c)(3)organization involved in medical research.Based on its expectation that proposed legislation will adversely affect the funding supporting its mission,Miracle hires a lobbyist to work in Washington to represent its views.

Accepted Answer

The answer of Miracle,Inc. ,is a § 501(c)(3)organization involved in...

Question 8

Wett,Inc. ,a § 501(c)(3)exempt organization,acquired all the stock of a for-profit corporation for $150,000.Wett is a private foundation.The acquired corporation was not a related business.Calculate the tax on excess business holdings.Assume that corrective action is taken so that the additional tax does not apply.

Accepted Answer

The answer of Wett,Inc. ,a § 501(c)(3)exempt organization,acquired all the...

Question 9

For purposes of the unrelated business income tax (UBIT),land that is acquired by the exempt organization for later exempt-use is excluded from the definition of debt-financed property if certain requirements are satisfied.Which of the following is not included in the requirements?

Accepted Answer

A) The principal purpose of acquiring the land is for use (substantially all)in achieving the organization's exempt purpose. 
B) The fair market value of the land is not over 50% of the fair market value of land presently owned by the exempt organization. 
C) The use of the land by the exempt organization will begin within ten years of the acquisition date. 
D) At the date the land is acquired,it is located in the neighborhood of other property of the organization for which substantially all the use is for achieving the organization's exempt purpose. 
E) All of the above are requirements.

Question 10

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

Accepted Answer

The answer of Which exempt organizations are not required to...

Question 11

Discuss any negative tax consequences that result from an exempt organization being classified as a private foundation.

Accepted Answer

The answer of Discuss any negative tax consequences that result...

Question 12

Nice,Inc. ,a § 501(c)(3)organization,inherited 100% of the stock of Aggressive,Inc. ,a for-profit entity,at the beginning of the year.Although Nice plans on selling the stock of Aggressive,a buyer has not yet been located.Aggressive's taxable income for the year is $600,000.Aggressive distributed a dividend of $450,000 to Nice at the beginning of December.Determine the tax consequences for the taxable income and the dividend payment to Aggressive,Inc.

Accepted Answer

The answer of Nice,Inc. ,a § 501(c)(3)organization,inherited 100% of the...

Question 13

Which of the following requirements must be satisfied for an organization to be subject to the unrelated business income tax (UBIT)?

Accepted Answer

A) The organization is an exempt organization. 
B) The organization conducts a trade or business that is regularly carried on. 
C) The trade of business is not substantially related to the exempt purpose of the organization. 
D) Only b.and c.must be satisfied. 
E) a. ,b. ,and c.must be satisfied.

Question 14

Which of the following § 501(c)(3)exempt organizations is appropriately classified as a private foundation?

Accepted Answer

A) First Methodist Church. 
B) University of Richmond. 
C) Williamsburg Community Hospital. 
D) Salvation Army. 
E) None of the above.

Question 15

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

Accepted Answer

The answer of Are organizations that qualify for exempt organization...

Question 16

Soft,Inc. ,a § 501(c)(3)organization,has been leasing a building to Ice,Inc. ,a taxable entity,for 12 years.The lease terminates in the current tax year.Soft's adjusted basis for the building is $350,000.It sells the building to the Realty Partnership,a taxable entity,for $625,000.Selling expenses are $37,500.

Accepted Answer

The answer of Soft,Inc. ,a § 501(c)(3)organization,has been leasing a...

Question 17

Loyal,Inc. ,is a §501(c)(3)organization that is not classified as a private foundation.During the current year,it is subject to intermediate sanctions.What other options does the IRS have in dealing with an exempt organization engaging in prohibited transactions?

Accepted Answer

The answer of Loyal,Inc. ,is a §501(c)(3)organization that is not...

Question 18

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 19

Are some exempt organizations eligible to be recipients of contributions for which the donor does not qualify for a charitable contribution deduction?

Accepted Answer

The answer of Are some exempt organizations eligible to be...

Question 20

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

Exam 15: Exempt Entities

Which of the following statements is/are correct with respect to the unrelated business income tax (UBIT) ?

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.

Which of the following activities is not subject to the feeder organization rules?

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.

Personal property rental income is subject to and real property rental income is not subject to the unrelated business income tax.

Miracle,Inc. ,is a § 501(c)(3)organization involved in medical research.Based on its expectation that proposed legislation will adversely affect the funding supporting its mission,Miracle hires a lobbyist to work in Washington to represent its views.

For purposes of the unrelated business income tax (UBIT) ,land that is acquired by the exempt organization for later exempt-use is excluded from the definition of debt-financed property if certain requirements are satisfied.Which of the following is not included in the requirements?

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

Discuss any negative tax consequences that result from an exempt organization being classified as a private foundation.

Which of the following requirements must be satisfied for an organization to be subject to the unrelated business income tax (UBIT) ?

Which of the following § 501(c) (3) exempt organizations is appropriately classified as a private foundation?

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

Loyal,Inc. ,is a §501(c)(3)organization that is not classified as a private foundation.During the current year,it is subject to intermediate sanctions.What other options does the IRS have in dealing with an exempt organization engaging in prohibited transactions?

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?

Are some exempt organizations eligible to be recipients of contributions for which the donor does not qualify for a charitable contribution deduction?

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.