Deck 23: Exempt Entities

Question 1

Private foundations are permitted to engage in lobbying activities.

Answer 1

False

Question 2

The tax consequences to a donor of making a charitable contribution to an exempt organization classified as a private foundation are the same as the tax consequences to a donor of making a charitable contribution to an exempt organization that is not classified as a private foundation.

Answer 2

False

Question 3

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.

Answer 3

True

Question 4

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.

Question 5

A feeder organization is exempt from Federal income taxation because it carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt entity.

Question 6

An exempt organization can be subject to the Federal income tax.

Question 7

A church that is exempt under § 501(c)(3)cannot be classified as a private foundation.

Question 8

An organization that is a for-profit entity can partially qualify for exempt status.

Question 9

The League of Women Voters is a § 501(c)(3)organization.

Question 10

Exempt organizations which are appropriately classified as private foundations include churches,educational institutions,and charitable organizations receiving a major portion of their support from the general public or the U.S. ,a state,or a political subdivision thereof.

Question 11

One reason for granting an exemption from Federal income tax to certain organizations is the belief that such organizations can perform certain government-like functions,and thereby reduce the financial burden that would otherwise fall on the Federal government.

Question 12

George is running for mayor of Culpepper.The members of Third Church adamantly oppose his candidacy.They would like to run a political advertisement in the local newspaper opposing his candidacy.The newspaper ad would have no effect on Third Church's exempt status because the ad opposes George;it does not support his opponent.

Question 13

Under certain circumstances,an organization that labels itself as a church may not qualify as an exempt organization.

Question 14

If an organization qualifies for exempt status for Federal income tax purposes,it is exempt from all Federal income taxes.

Question 15

If an exempt organization is subject to intermediate sanctions,it forfeits its exempt status.

Question 16

To satisfy the broadly supported provision to avoid classification as a private foundation,the exempt organization must satisfy both an external support test and an internal support test.Under the internal support test,more than one-third of the exempt organization's support for the taxable year must come from gross investment income and unrelated business taxable income.

Question 17

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

Question 18

Theater,Inc. ,an exempt organization,owns a printing company,Printers,Inc. ,which remits 80% of its profits to Theater,Inc.Since Printers remits at least 80% of its profits to Theater,neither Theater,Inc. ,nor Printers,Inc. ,must pay income tax on this $80,000 ($100,000 ´ 80%).

Question 19

Certain exempt organizations can engage in lobbying to the same extent as for-profit corporations.

Question 20

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.

Question 21

If an exempt organization conducts a trade or business that is regularly carried on by the organization,it is subject to the unrelated business income tax (UBIT).

Question 22

The excise tax imposed on a private foundation's investment income can be imposed both as an initial (first-level)tax and an additional (second-level)tax.

Question 23

In calculating unrelated business taxable income,the exempt organization is permitted to deduct only the charitable contributions associated with the unrelated trade or business.

Question 24

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.

Question 25

A corporate payment that qualifies as a qualified sponsorship payment is not subject to the unrelated business income tax (UBIT).

Question 26

The purpose of the excise tax imposed on a private foundation for failure to distribute sufficient levels of income is to motivate the foundation to distribute more of its income for application to exempt purposes and thus be classified as a feeder organization.

Question 27

The key factor in determining whether an exempt entity's income from a bingo game is unrelated trade or business income is whether substantially all the work is performed by volunteers.

Question 28

The excise tax imposed on private foundations for excess business holdings is imposed on investments that enable the private foundation to control publicly-held rather than privately-held businesses.

Question 29

A trade or business that is operated by an exempt organization which otherwise would be subject to the tax on unrelated business income is exempt from tax,if the profits generated by the trade or business are used by the exempt organization for exempt purposes.

Question 30

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.

Question 31

The excise tax that is imposed on private foundations for making jeopardizing investments is imposed because the foundation has made speculative investments that put the foundation's income at risk.

Question 32

Federal agencies exempt from Federal income tax under § 501(c)(1)are not subject to the unrelated business income tax (UBIT).

Question 33

For an activity to be considered as regularly carried on for purposes of the unrelated business income tax,the activity must be conducted during the work week (i.e. ,activities performed on the weekend are not considered in determining if the activity is regularly carried on).

Question 34

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

Question 35

Revenue generated by an exempt organization from the distribution of low-cost items is not income from an unrelated trade or business.

Question 36

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.

Question 37

An activity is not an unrelated trade or business for purposes of the unrelated business income tax (UBIT)unless it is profitable.

Question 38

An exempt organization is located in the state of Nevada.Gambling in Nevada is legal.Therefore,bingo games are conducted by both taxable and tax-exempt organizations.If the net earnings from the bingo games are less than $25,000,the exempt organization is not subject to the unrelated business income tax (UBIT).

Question 39

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

Question 40

Exchanging with or renting to other for-profit organizations the exempt organization's donor or membership list is not an unrelated trade or business.

Question 41

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.

Question 42

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

A)Religious,charitable,or educational organization.
B)Voluntary employees' beneficiary association.
C)Labor,agricultural,or horticultural organization.
D)Stock exchange.
E)All of the above can be exempt from tax.

Question 43

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.

Question 44

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

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 excise taxes.
D)Only a.and b.
E)a. ,b. ,and c.

Question 45

Which of the following qualify as exempt organizations?

A)Federal and related agencies.
B)Religious,charitable,and educational organizations.
C)Civic leagues.
D)Social clubs.
E)All of the above can be exempt from tax.

Question 46

Which of the following is a requirement for exempt status?

A)The organization does not exert political influence.
B)The organization has not been subject to intermediate sanctions for the past 18 months.
C)The organization serves some type of common good.
D)Only a.and c.
E)a. ,b. ,and c.

Question 47

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

Question 48

A church is not required to obtain IRS approval for its exempt status.

Question 49

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

Question 50

Even though a church is not required to obtain IRS approval of its exempt status,it still must file Form 990 (Return of Organization Exempt from Income Tax)annually.

Question 51

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.

Question 52

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

A)Girl Scouts of America.
B)Washington and Lee University.
C)League of Women Voters.
D)Only a.and b.are § 501(c)(3)organizations.
E)All of the above are § 501(c)(3)organizations.

Question 53

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)].

Question 54

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

Question 55

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?

A)Only Museum,Inc. ,is subject to Federal income taxation.
B)Both Museum,Inc. ,and Hotel,Inc. ,are subject to Federal income taxation.
C)Hotel,Inc. ,is subject to Federal income taxation on all of its income and Museum,Inc. ,is subject to Federal income taxation on 25% of its income.
D)Only Hotel,Inc. ,is subject to Federal income taxation.
E)None of the statements is correct.

Question 56

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

Question 57

Which of the following statements regarding intermediate sanctions is correct?

A)Intermediate sanctions are self-assessing (i.e. ,calculated and paid by the taxpayer rather than being imposed by the IRS).
B)The tax is imposed on the exempt organization.
C)Both a first-level tax and a second-level tax may apply.
D)The corporate tax rates apply in calculating the amount of the tax liability.
E)None of the above is correct.

Question 58

Rose,Inc. ,a qualifying § 501(c)(3)organization,incurs lobbying expenditures of $145,000 during the taxable year.Exempt purpose expenditures are $500,000.If Rose makes the election under § 501(h)to make lobbying expenditures on a limited basis,its tax liability resulting from the lobbying expenditures is:

A)$0.
B)$7,250.
C)$11,250.
D)$36,250.
E)Some other amount.

Question 59

Which of the following are exempt organizations?

A)National Collegiate Athletic Association (NCAA).
B)American Bankers Association (ABA).
C)Professional Golfers Association (PGA).
D)Only a.and c.
E)a. ,b. ,and c.

Question 60

Which of the following statements is correct?

A)Exempt organizations cannot engage in significant levels of lobbying activities.
B)Certain exempt organizations can elect to engage in lobbying activities on a limited basis.
C)Churches can engage in lobbying activities on an unlimited basis because of the separation of church and state provision.
D)Only a.and b.are correct.
E)Only a.and c.are correct.

Question 61

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?

A)The principal purpose of acquiring the land is for investment.
B)The land is sold within ten years of the acquisition date in the organization's exempt purpose.
C)The land is located in the United States.
D)Only a.and b.
E)None of the above.

Question 62

Which of the following statements regarding a private foundation is not correct?

A)Only certain exempt organizations are classified as private foundations.
B)A donor who makes a contribution to a private foundation has identical tax consequences as a donor who makes a contribution to a public charity.
C)A private foundation may be subject to certain excise taxes because it is a private foundation.
D)A church is not a private foundation.
E)All of the statements are correct.

Question 63

Acquisition indebtedness consists of the unpaid amounts of which of the following for debt-financed property?

A)Debt incurred in acquiring or improving the property.
B)Debt incurred to enable the organization to carry out its exempt purpose.
C)Debt incurred to enable the exempt organization to acquire a feeder organization.
D)Only a.and b.
E)a. ,b. ,and c.

Question 64

Which of the following types of § 501(c)(3)organizations are not private foundations?

A)Hospitals.
B)Churches.
C)Colleges and universities.
D)Only a.and b.
E)a. ,b. ,and c.

Question 65

Relevant factors in the unrelated business income tax (UBIT)rules for determining whether a trade or business is regularly carried on by an exempt organization do not include which of the following?

A)The proportion of the total revenue of the exempt organization raised by the activity.
B)The frequency of the activity.
C)The continuity of the activity.
D)The manner in which the activity is pursued.
E)All of the above are relevant factors.

Question 66

Which of the following are consequences of tax-exempt status?

A)Not necessary to file a Federal income tax return.
B)Generally exempt from Federal income tax.
C)Contributions to the exempt organization may be deductible by the donor.
D)Only b.and c.
E)a. ,b. ,and c.

Question 67

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?

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

Question 68

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.

Question 69

Blue,Inc. ,receives its support from the following sources. Which of the following statements is correct?

A)Blue,Inc. ,is a private foundation because it satisfies the external support test and fails the internal support test.
B)Blue,Inc. ,is not a private foundation because it fails both the internal and external support tests.
C)Blue,Inc. ,is a private foundation because it satisfies both the external support test and the internal support test.
D)Blue,Inc. ,is not a private foundation because it satisfies both the external support test and the internal support test.
E)None of the statements is true.

Question 70

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?

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 71

Which of the following excise taxes are imposed on the private foundation because it engages in prohibited transactions?

A)Tax on investment income.
B)Tax on self-dealing.
C)Tax on failure to distribute income.
D)Only b.and c.
E)a. ,b. ,and c.

Question 72

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

A)Tax on jeopardizing investments.
B)Tax on self-dealing.
C)Tax on excessive foundation manager compensation.
D)Tax on excess business holdings.
E)All of these taxes may be imposed on a private foundation.

Question 73

Which of the following taxes that are imposed on private foundations is,effectively,an audit fee to defray IRS expenses?

A)Tax on self-dealing.
B)Tax on failure to distribute income.
C)Tax on taxable expenditures.
D)Only a.and c.
E)None of the above.

Question 74

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

A)Federal agencies.
B)Churches.
C)Exempt organizations whose annual gross receipts do not exceed $25,000.
D)Private foundations.
E)None of these entities must file Form 990.

Question 75

Third Church operates a gift shop in its parish house.The total income of the church is $800,000.Of this amount,$300,000 comes from offerings and $500,000 comes from the net income of the gift shop.The gift shop operations are conducted by five full-time employees.Which of the following statements is correct?

A)The $800,000 is unrelated business income.
B)The $500,000 of gift shop net income is unrelated business income.
C)The $300,000 is unrelated business income because the gift shop is a feeder organization.
D)None of the $800,000 is unrelated business income.
E)The unrelated business income tax does not apply to churches.

Question 76

Swan,Inc. ,a tax-exempt organization,leases a building and equipment to ABC Corporation.The rental income from the building is $160,000 and from the equipment is $12,000.Rental expenses are $100,000 for the building and $11,000 for the equipment.What adjustment must be made to net unrelated business income?

A)$0.
B)($11,000).
C)($12,000).
D)($61,000).
E)Some other amount.

Question 77

Which of the following statements is correct?

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 78

Teal,Inc. ,is a private foundation which failed to distribute an adequate amount of income for the exempt purpose of Teal.Which of the following statements is correct?

A)An excise tax in the form of an initial tax at the rate of 5% may be imposed on Teal.
B)An excise tax in the form of an initial tax at the rate of 2.5% may be imposed on the foundation manager.
C)An excise tax in the form of an additional tax at the rate of 100% may be imposed on Teal.
D)An excise tax in the form of an additional tax at the rate of 50% may be imposed on the foundation manager.
E)None of the statements is correct.

Question 79

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

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 distribution of low-cost articles 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.

Question 80

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