Question 1

An exempt organization which is subject to any of the excise taxes imposed on private foundations must file Form 4720 (Return of Certain Excise Taxes on Charities and Other Persons).

Accepted Answer

This statement is true. Form 4720 is used by exempt organizations to report excise taxes on private foundations, including taxes on self-dealing, excess business holdings, and investments that jeopardize charitable purpose.

Question 2

Which of the following attributes are associated with exempt organizations?

Accepted Answer

These characteristics tend to permeate the definitional requirements of many types of exempt organizations.

Question 3

Which of the following are exempt organizations?

Accepted Answer

The answer of Which of the following are exempt organizations?
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Question 4

Hotel,Inc.,is a feeder organization for Museum,Inc.,an exempt organization.Hotel,Inc.,provides approximately 25% of the support needed by Museum,Inc.,to carry out its tax-exempt mission.Which of the following statements is correct?

Accepted Answer

Even though a feeder organization carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt organization,it is not exempt from Federal income taxation.

Question 5

Garden,Inc.,a qualifying § 501(c)(3)organization,incurs lobbying expenditures of $210,000 during the taxable year.Exempt purpose expenditures are $900,000.If Garden makes the election under § 501(h)to make lobbying expenditures on a limited basis,its tax liability resulting from the lobbying expenditures is:

Accepted Answer

The lobbying nontaxable amount is $160,000 [($500,000 F1F1F1S1F1F1F10 20%)+ ($400,000 F1F1F1S1F1F1F10 15%)].Therefore,the ceiling on lobbying expenditures is $240,000 ($160,000 F1F1F1S1F1F1F10 150%).Since Garden did not exceed the ceiling,the tax imposed is only on the amount of the lobbying expenditures in excess of $160,000 ($210,000 - $160,000 = $50,000).The tax is imposed at a rate of 25%.Thus,the tax liability is $12,500 ($50,000 F1F1F1S1F1F1F10 25%).

Question 6

Debt-financed property consists of all real property of a tax-exempt organization on which there is a mortgage.

Accepted Answer

The definition of debt-financed property is more restrictive than this.Debt-financed property includes all property of the exempt organization that is held to produce income and on which there is acquisition indebtedness except for the following.
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Question 7

Unless the "widely available" provision is satisfied,a § 501(c)(3)exempt organization (excluding churches and private foundations)must make copies of the following available to the general public: Form 990 (Return of Organization Exempt from Income Tax)and Form 1023 [Application for Recognition of Exemption under § 501(c)(3)] or Form 1024 [Application for Recognition of Exemption under § 501(a)].

Accepted Answer

Unless the "widely available" provision is satisfied, a § 501(c)(3) exempt organization (excluding churches and private foundations) must make copies of Form 990 and either Form 1023 or Form 1024 available to the general public.

Question 8

Exempt organizations which are required to file an annual information return,except for Private Foundations,use Form 990 (Return of Organization Exempt from Income Tax).

Accepted Answer

This is true. Exempt organizations (excluding Private Foundations) are required to file Form 990 for their annual information return.

Question 9

If the unrelated business income of an exempt organization is $25,000 or less,the unrelated business income tax (UBIT)will be $0.

Accepted Answer

Only a specific deduction of $1,000 is provided by statute in calculating unrelated business taxable income.

Question 10

All exempt organizations must obtain IRS approval to obtain exempt status.

Accepted Answer

Only certain exempt organizations are required to obtain IRS approval for their exempt status.However,even when not required to obtain such approval,it is a good idea to do so.

Question 11

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

Accepted Answer

Only § 501(c)(3)organizations can be classified as private foundations.However,certain § 501(c)(3)organization such as hospitals (option a.)and educational institutions (option b.)are statutorily excluded from being classified as a private foundation.In addition,exempt organizations that are broadly supported by the general public are excluded from the classification (option d.).

Question 12

Which of the following is not an example of an exempt organization?

Accepted Answer

A stock exchange is not an example of an exempt organization. The other options listed (religious, charitable, educational organizations, voluntary employees' beneficiary association, labor, agricultural, or horticultural organization) may qualify for tax-exempt status.

Question 13

If personal property is leased with real property and more than 50% 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

All of the lease income in this case is subject to the unrelated business income tax.

Question 14

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

Accepted Answer

Under certain circumstances,personal property rental income is not subject to the unrelated business income tax,and under certain circumstances,real property rental income is subject to the unrelated business income tax.

Question 15

Which of the following statements is correct?

Accepted Answer

Churches are not permitted to engage in lobbying activities.

Question 16

Which of the following qualify as exempt organizations?

Accepted Answer

The answer of Which of the following qualify as exempt...

Question 17

The due date for both Form 990 (Return of Organization Exempt from Income Tax)and Form 990-PF (Return of Private Foundation)is the fifteenth day of the fifth month after the end of the taxable year.

Accepted Answer

The due date for both Form 990 and Form 990-PF is indeed the fifteenth day of the fifth month after the end of the taxable year.

Question 18

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

Accepted Answer

All three of these options are available to the IRS in dealing with exempt organizations an prohibited transactions.

Question 19

Unrelated debt-financed income,net of the unrelated debt-financed deductions,is subject to the unrelated business income tax only if the exempt organization is a private foundation.

Accepted Answer

Unrelated debt-financed income,net of the unrelated debt-financed deductions,is subject to the unrelated business income tax.This applies to exempt organizations that are and are not classified as private foundations.

Question 20

Which of the following statements regarding intermediate sanctions is correct?

Accepted Answer

Intermediate sanctions are imposed by the IRS (a.).The tax is imposed on the disqualified persons and the exempt organization managers (b.).For the excise tax on the disqualified person,the tax rate is 25% for the first-level tax and 200% for the second-level tax.For the excise tax on the exempt organization manager,the tax rate is 10% with a statutory ceiling of $10,000 of the excess benefit (d.).

Quiz 14: Exempt Entities