Theater,Inc.,an exempt organization,owns a printing company,Printers,Inc.,which remits 85% of its profits to Theater,Inc.Since Printers remits at least 85% of its profits to Theater,neither Theater,Inc.,nor Printers,Inc.,must pay income tax on this $85,000 ($100,000 × 85%).

Question

Quizplus · Accepted Answer

Exempt organizations must pay tax on unrelated business income, and owning a for-profit printing company likely constitutes unrelated business income for Theater, Inc. Therefore, Printers, Inc.'s profits may be subject to tax.