Question 1

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

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Question 2

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?

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Question 3

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

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Question 4

Agnes is aware that a feeder organization is subject to Federal income taxation.She wonders whether an organization otherwise taxable as a feeder organization can avoid such status if it remits less than 80% of its profits to the § 501(c)(3) entity.

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Question 5

What are the common characteristics of organizations that receive exempt status?

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Question 6

Sandy is the treasurer for Choose, Inc., a § 501(c)(3) organization.The CEO has indicated that he would like for the exempt organization to make a substantial contribution to an entity which is lobbying against a legislative position that would be detrimental to Choose, Inc.Describe for the CEO under what circumstances an exempt organization can be eligible to lobby.

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Question 7

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?

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Question 8

Define a private foundation.

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Question 9

Discuss benefits for which an exempt organization may be eligible, other than exemption from Federal income tax.

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Question 10

What are the excise taxes imposed on private foundations, and why are they imposed?

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Question 11

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

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Question 12

What is the purpose of the unrelated business income tax?

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Question 13

Francis is the CEO of Give, Inc., a § 501(c)(3) organization.Francis informs you that the will of a major donor transfers 100% of the stock of Friendly Hot Dogs to Give, Inc.Since Friendly is a profitable entity, Francis would like for Give to continue to own and operate Friendly Hot Dogs.You inform Francis that Friendly would be a feeder organization.Describe for the CEO what a feeder organization is and how it is taxed.

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Question 14

An eligible § 501(c)(3) organization has made the § 501(h) election to participate in lobbying on a limited basis.If the ceiling on lobbying established in § 501(h) (lobbying nontaxable amount) is exceeded, what are the potential tax consequences to the exempt organization?

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Question 15

Support the Pets, Inc., a § 501(c)(3) organization, provides pet food to humane societies.All of the pet food is received as contributions from individuals or from a wholly-owned, for-profit subsidiary (Sales, Inc.), which is in the retail pet food business (i.e., pet food that has been in inventory for over 120 days is transferred to Support the Pets for distributions to humane societies).In addition to the pet food, Sales distributes 75% of its net income each year to Support the Pets.

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Question 16

Midge is the chairman of the board for a § 501(c)(3) exempt organization.She would like the exempt organization to be able to avoid private foundation classification status.Describe how this can be achieved.

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Question 17

What income and activities are not subject to the feeder organization rules?

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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?

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Question 19

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

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Question 20

What is the purpose of the "broadly supported" exception for an exempt organization being classified as a private foundation?

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Quiz 23: Exempt Entities