First Americans, Inc., a § 501(c)(3) organization, operates a museum that depicts the lives of a tribe of Native Americans. It charges an admission fee but also finances its operations through endowment income, contributions, and gift shop sales. The gift shop is operated by 50 volunteers and the museum is operated by 15 employees. Revenue by source is: $\begin{array}{lr}
\text { Admission fees } & \$ 700,000 \
\text { Endowment income } & 75,000 \
\text { Gift shop net income } & 300,000 \
\text { Contributions } & 100,000
\end{array}$
a. The only potential source of UBI for First Americans, Inc., is the gift shop net income of $300,000. However, since the individuals performing substantially all the work of the gift shop do so without compensation (i.e., they are volunteers), the gift shop net income of $300,000 is not classified as unrelated business income.
a. Determine the amount of First Americans' unrelated business income (UBI).
b. Determine the amount of First American's unrelated business income tax (UBIT).

Question

First Americans, Inc., a § 501(c)(3) organization, operates a museum that depicts the lives of a tribe of Native Americans. It charges an admission fee but also finances its operations through endowment income, contributions, and gift shop sales. The gift shop is operated by 50 volunteers and the museum is operated by 15 employees. Revenue by source is: $\begin{array}{lr}
\text { Admission fees } & \$ 700,000 \
\text { Endowment income } & 75,000 \
\text { Gift shop net income } & 300,000 \
\text { Contributions } & 100,000
\end{array}$ 
a. The only potential source of UBI for First Americans, Inc., is the gift shop net income of $300,000. However, since the individuals performing substantially all the work of the gift shop do so without compensation (i.e., they are volunteers), the gift shop net income of $300,000 is not classified as unrelated business income.
a. Determine the amount of First Americans' unrelated business income (UBI).
b. Determine the amount of First American's unrelated business income tax (UBIT).

Quizplus · Accepted Answer

The Answer of First Americans, Inc., a § 501(c)(3) organization, operates a museum that depicts the lives of a tribe of Native Americans. It charges an admission fee but also finances its operations through endowment income, contributions, and gift shop sales. The gift shop is operated by 50 volunteers and the museum is operated by 15 employees. Revenue by source is: $\begin{array}{lr}
\text { Admission fees } & \$ 700,000 \
\text { Endowment income } & 75,000 \
\text { Gift shop net income } & 300,000 \
\text { Contributions } & 100,000
\end{array}$ 
a. The only potential source of UBI for First Americans, Inc., is the gift shop net income of $300,000. However, since the individuals performing substantially all the work of the gift shop do so without compensation (i.e., they are volunteers), the gift shop net income of $300,000 is not classified as unrelated business income.
a. Determine the amount of First Americans' unrelated business income (UBI).
b. Determine the amount of First American's unrelated business income tax (UBIT).

First Americans, Inc A the Only Potential Source of UBI for First Americans