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Exam 23: Exempt Entities

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Question 51

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Which of the following statements is correct?

A) The unrelated business income tax (UBIT) does not apply to exempt organizations that receive broad public support.
B) The unrelated business income tax (UBIT) treats the tax-exempt entity as if it were subject to the corporate income tax on its unrelated business income.
C) Unrelated business income is income derived from activities not related to the exempt purpose of the exempt organization.
D) Only b.and c.are correct.
E) a. ,b. ,and c.are correct

F) B) and E)
G) A) and E)

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Question 52

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Which of the following requirements are among the three requirements that must be satisfied for an exempt organization to be subject to the unrelated business income tax?

A) The exempt organization conducts a trade or business.
B) The trade or business is substantially related to the exempt purpose of the organization.
C) The trade or business normally generates an annual profit of at least $25,000.
D) Only a.and c.
E) a. ,b. ,and c.

F) A) and D)
G) A) and E)

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Question 53

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Which of the following are organizations exempt under § 501(c) (3) ?

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

Define a qualified corporate sponsorship payment.

The unrelated business income tax (UBIT)is designed to treat the entity as if it were subject to the corporate income tax,with the highest corporate tax rate (35%)applying.

An exempt organization that otherwise would be classified as an unrelated trade or businesses will not be subject to the unrelated business income tax if the individuals performing substantially all the work of the trade or business do so without compensation.

Which of the following exempt organizations are required to file Form 990 (Return of Organization Exempt from Income Tax) ?

Links,Inc. ,an exempt organization whose mission is to aid marriages threatened by golf,contributes $100,000 to Couples,Inc. ,an exempt organization which provides counseling to dysfunctional marriages.Links,Inc. ,has net UBTI (excluding any modifications associated with charitable contributions)of $800,000.Assuming that the $100,000 contribution has been deducted in calculating net UBTI,determine the amount of any further adjustment in calculating UBTI.

Which of the following is not an excise tax that may be imposed on a private foundation?

Join,Inc. ,a § 501(c)(3)exempt organization,engages in an excess benefit transaction.The amount of the excess benefit is $200,000.Calculate the amount of the excise tax (first-level tax)imposed under the intermediate sanctions provision.

While engaging in a prohibited transaction can result in an exempt organization being subject to tax,it will not result in an exempt organization losing its exempt status.

Private foundations are permitted to engage in lobbying activities.

Wonder,Inc. ,a § 501(c)(3)exempt organization,acquired all the stock of a for-profit corporation for $100,000.Wonder 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.

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

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

Qualified state tuition programs are exempt from Federal income tax under § 501(c)(3).

The excise taxes such as the tax on self-dealing and the tax on excess business holdings are imposed only on exempt organizations classified as private foundations.

If an exempt organization owns a feeder organization,the exempt organization is not taxed on the profits of the feeder organization under the unrelated business income tax (UBIT)rules.

Which of the following is one of the requirements 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?