Question 1

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).

Accepted Answer

The statement is incorrect. Whether an activity is considered regularly carried on for purposes of the unrelated business income tax depends on several factors, including the frequency and continuity of the activity, and whether it is conducted in a manner similar to that of for-profit organizations. The day of the week on which the activity is conducted is not a determining factor.

Question 2

A corporate sponsorship payment that is contingent on attendance at a sporting event increases the amount of unrelated business income.

Accepted Answer

If a corporate sponsorship payment is contingent on attendance at a sporting event, it is considered advertising revenue and is subject to unrelated business income tax (UBIT) rules. This can lead to an increase in unrelated business income for the organization receiving the sponsorship payment.

Question 3

The excise tax imposed on a private foundation's investment income can be imposed as an initial (first­level) tax but cannot be imposed as an additional (second-level) tax.

Accepted Answer

The excise tax on a private foundation's investment income is a first-level tax and cannot be imposed as an additional (second-level) tax.

Question 4

The key factors in determining whether an exempt entity's income from a bingo game is unrelated trade or business income are whether substantially all the work is performed by volunteers and all of the prizes to be awarded are received as donations.

Accepted Answer

The answer of The key factors in determining whether an...

Question 5

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.

Accepted Answer

The answer of The excise tax that is imposed on...

Question 6

For an exempt organization to be subject to the unrelated business income tax, the trade or business must not be substantially related to the exempt purpose of the organization.

Accepted Answer

The unrelated business income tax only applies to trade or business activities that are not substantially related to the exempt purpose of the organization. If the activity is related to the exempt purpose, it is considered "related business income" and is not subject to taxation.

Question 7

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

Accepted Answer

According to IRS regulations, revenue generated by an exempt organization from the distribution of low-cost items (i.e. items sold for no more than twice their direct costs) is considered "related" and is not subject to unrelated business income tax (UBIT).

Question 8

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

Accepted Answer

Nonprofit organizations exempt from Federal income tax under § 501(c)(1) are not subject to the unrelated business income tax (UBIT) since they are considered instrumentalities of the government. Therefore, their activities are not subject to the same tax rules as other tax-exempt organizations that engage in unrelated business activities.

Question 9

The unrelated business income tax (UBIT) is calculated by multiplying unrelated business taxable income by the highest corporate tax rate.

Accepted Answer

The answer of The unrelated business income tax (UBIT) is...

Question 10

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).

Accepted Answer

The answer of If an exempt organization conducts a trade...

Question 11

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.

Accepted Answer

The answer of The excise tax imposed on private foundations...

Question 12

For purposes of the unrelated business income tax (UBIT), a trade or business consists of any activity conducted for the production of income through the sale of merchandise, or from the performance of services for which profits have been earned during at least two of the five previous years.

Accepted Answer

The answer of For purposes of the unrelated business income...

Question 13

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.

Accepted Answer

The answer of The purpose of the excise tax imposed...

Question 14

A profit-related activity of an exempt organization avoids the unrelated business income tax if greater than 80% of the merchandise sold had been received as a contribution.

Accepted Answer

The answer of A profit-related activity of an exempt organization...

Question 15

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).

Accepted Answer

The answer of An exempt organization is located in the...

Question 16

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

Accepted Answer

According to the IRS, income from a bingo game or a casino game conducted by an exempt organization may be subject to unrelated business income tax (UBIT) if the game is not substantially run by volunteers and is regularly carried on.

Question 17

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

Accepted Answer

The exempt organization is not permitted to deduct only the charitable contributions associated with the unrelated trade or business. It must calculate and deduct all ordinary and necessary expenses related to the unrelated trade or business in order to determine its unrelated business taxable income.

Question 18

Some of the excise taxes which may be imposed on private foundations may be imposed on both the private foundation and the foundation manager.

Accepted Answer

Some excise taxes, such as the tax on self-dealing transactions or excess business holdings, may be imposed on both the private foundation and the foundation manager involved in the transaction or holding.

Question 19

The trade or business of selling merchandise where substantially all of the merchandise has been received as contributions or gifts is not subject to the unrelated business income tax, but is subject to the tax on feeder organizations.

Accepted Answer

The answer of The trade or business of selling merchandise...

Question 20

If an exempt organization conducts a trade or business that consists of either exchanging or renting to other exempt
organizations the organization's donor or membership list, such trade or business is an unrelated trade or business.

Accepted Answer

The answer of If an exempt organization conducts a trade...

Quiz 23: Exempt Entities

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).

A corporate sponsorship payment that is contingent on attendance at a sporting event increases the amount of unrelated business income.

The excise tax imposed on a private foundation's investment income can be imposed as an initial (firstlevel) tax but cannot be imposed as an additional (second-level) tax.

The key factors in determining whether an exempt entity's income from a bingo game is unrelated trade or business income are whether substantially all the work is performed by volunteers and all of the prizes to be awarded are received as donations.

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.

For an exempt organization to be subject to the unrelated business income tax, the trade or business must not be substantially related to the exempt purpose of the organization.

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

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

The unrelated business income tax (UBIT) is calculated by multiplying unrelated business taxable income by the highest corporate tax rate.

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).

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.

For purposes of the unrelated business income tax (UBIT), a trade or business consists of any activity conducted for the production of income through the sale of merchandise, or from the performance of services for which profits have been earned during at least two of the five previous years.

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.

A profit-related activity of an exempt organization avoids the unrelated business income tax if greater than 80% of the merchandise sold had been received as a contribution.

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

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

Some of the excise taxes which may be imposed on private foundations may be imposed on both the private foundation and the foundation manager.

The trade or business of selling merchandise where substantially all of the merchandise has been received as contributions or gifts is not subject to the unrelated business income tax, but is subject to the tax on feeder organizations.

If an exempt organization conducts a trade or business that consists of either exchanging or renting to other exempt organizations the organization's donor or membership list, such trade or business is an unrelated trade or business.

Quiz 23: Exempt Entities

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).

A corporate sponsorship payment that is contingent on attendance at a sporting event increases the amount of unrelated business income.

The excise tax imposed on a private foundation's investment income can be imposed as an initial (first­level) tax but cannot be imposed as an additional (second-level) tax.

The key factors in determining whether an exempt entity's income from a bingo game is unrelated trade or business income are whether substantially all the work is performed by volunteers and all of the prizes to be awarded are received as donations.

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.

For an exempt organization to be subject to the unrelated business income tax, the trade or business must not be substantially related to the exempt purpose of the organization.

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

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

The unrelated business income tax (UBIT) is calculated by multiplying unrelated business taxable income by the highest corporate tax rate.

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).

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.

For purposes of the unrelated business income tax (UBIT), a trade or business consists of any activity conducted for the production of income through the sale of merchandise, or from the performance of services for which profits have been earned during at least two of the five previous years.

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.

A profit-related activity of an exempt organization avoids the unrelated business income tax if greater than 80% of the merchandise sold had been received as a contribution.

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

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

Some of the excise taxes which may be imposed on private foundations may be imposed on both the private foundation and the foundation manager.

The trade or business of selling merchandise where substantially all of the merchandise has been received as contributions or gifts is not subject to the unrelated business income tax, but is subject to the tax on feeder organizations.

If an exempt organization conducts a trade or business that consists of either exchanging or renting to other exempt organizations the organization's donor or membership list, such trade or business is an unrelated trade or business.

The excise tax imposed on a private foundation's investment income can be imposed as an initial (firstlevel) tax but cannot be imposed as an additional (second-level) tax.