Question 1

Political parties and campaign committees can qualify for tax-exempt status.

Accepted Answer

Political parties and campaign committees could qualify for Section 527 tax-exempt status under the IRC.

Question 2

A good measure of whether a not-for-profit organization is efficient in its fund-raising efforts is

Accepted Answer

Fund-raising expenses as a percentage of public support measures the amount of money spent on fund-raising activities in relation to the amount of money donated by the public. A lower percentage indicates more efficient fund-raising efforts, as less money is being spent to generate public support.

Question 3

The term that means information skewed toward a particular belief with a tendency to have little or no factual basis is

Accepted Answer

Propaganda is defined as information that is biased towards a particular belief, and often has little or no factual basis. Political influence, legislation, and lobbying may also affect the information presented, but they do not inherently involve distortion of the facts.

Question 4

Why do states and the federal government exercise oversight responsibility over not-for-profit,tax-exempt corporations? How do states and the federal government differ in the way they exercise this responsibility?

Accepted Answer

The answer of Why do states and the federal government...

Question 5

The income most likely to be considered unrelated business income of a human service organization that provides immunizations to children in the community is

Accepted Answer

The regular sale of sweatshirts is not related to the organization's tax-exempt purpose of providing immunizations and therefore may be considered unrelated business income subject to taxation. The rental of extra space, interest and dividend income, and gain on the sale of equipment are not related to the organization's tax-exempt purpose and would also be subject to taxation if they meet the criteria for unrelated business income.

Question 6

The Internal Revenue Service requires that information from the audited financial statements be used to complete the Form 990.

Accepted Answer

The Internal Revenue Service does not require audited financial information. The information on the Form 990 need not be on the accrual basis. Therefore, the financial information on the Form 990 can be different from that provided in the organization's audited financial statements.

Question 7

Your client is a nongovernmental not-for-profit museum that operates a gift shop.Explain the unrelated business income tax to your client and suggest ways to avoid this tax.

Accepted Answer

The answer of Your client is a nongovernmental not-for-profit museum...

Question 8

All of the following are reasons why the Internal Revenue Service (IRS)overhauled the Form 990 for tax years beginning in 2008 except

Accepted Answer

The IRS did not overhaul the Form 990 to shorten the time it takes to complete a return. The other choices are accurate reasons why the Form 990 was overhauled.

Question 9

The organization Shelter the Needy is completing its Form 990 and it is trying to determine if it has unrelated business income on which it must pay taxes.Which of the following would be subject to unrelated business income taxes?

Accepted Answer

The answer of The organization Shelter the Needy is completing...

Question 10

Public disclosure rules require that a tax-exempt not-for-profit organization

Accepted Answer

Public disclosure rules require that tax-exempt not-for-profit organizations make available a copy of their Form 990 (Return of Organization Exempt from Income Tax) to the public for a period of up to three years. This form provides information about the organization's mission, programs, finances, and governance. By making this form available, the organization is promoting transparency and accountability to its donors, supporters, and the general public.

Question 11

The Internal Revenue Service may impose intermediate sanctions on all of the following transactions between a not-for-profit organization and its executive officer except

Accepted Answer

Intermediate sanctions are penalties imposed by the IRS on not-for-profit organizations if they engage in transactions with their executive officers that are found to be excessive or unreasonable. This includes transactions such as excessive compensation, payment of more than fair rental value for property owned by the officer, and selling assets at a bargain price. However, providing fringe benefits comparable to those given to all employees is not a violation of IRS rules and thus is not subject to intermediate sanctions.

Question 12

Explain the purpose of "intermediate sanctions."

Accepted Answer

The answer of Explain the purpose of "intermediate sanctions."...

Question 13

A good measure of whether a not-for-profit organization is spending too much on overhead,such as general and administrative expenses,is

Accepted Answer

The percentage of total expenses spent on the program function as opposed to supporting the programs is the best measure of whether a not-for-profit organization is spending too much on overhead. This is because not-for-profit organizations exist to fulfill a mission or purpose, and the program function is the core activity that achieves that mission. Therefore, a higher percentage of expenses dedicated to the program function indicates that the organization is using its resources efficiently to achieve its purpose.

Question 14

A good measure of whether a not-for-profit organization is operating its programs efficiently is

Accepted Answer

The ratio of program expenses to the number of clients served is a good measure of whether a not-for-profit organization is operating its programs efficiently. This measure indicates how much of the organization's expenses are devoted to delivering services to its clients. If this ratio is high, it means that the organization is spending a large proportion of its resources directly on the program function. It is important to note that this measure should be used in conjunction with other measures, such as outcome measures, to fully assess an organization's effectiveness.

Question 15

All not-for-profit organizations are required to file some type of Form 990 with the Internal Revenue Service.

Accepted Answer

Although it is true most organizations must file some form of the 990, religious organizations and governmental not-for-profits are examples of not-for-profit organizations not required to file.

Question 16

Describe the difficulty in comparing the financial performance of a not-for-profit organization to other similar organizations.What benchmarks are available to assist in this task?

Accepted Answer

The answer of Describe the difficulty in comparing the financial...

Question 17

A tax-exempt organization that receives its support primarily from a large number of individuals or corporations and a relatively small amount from investment income is called a

Accepted Answer

A tax-exempt organization that receives its support primarily from a large number of individuals or corporations and a relatively small amount from investment income is called a public charity. Public charities generally have broad public support and engage in activities such as providing assistance to the needy, promoting education or religion, and supporting the arts. Private foundations, on the other hand, typically receive most of their support from a single individual, family, or corporation and are subject to stricter regulations and tax laws. Public foundations are a type of public charity that receives its support primarily from a few large donors rather than a broad base of public support. Voluntary health and welfare organizations are also a type of public charity that focuses specifically on providing health and welfare services to individuals in need.

Question 18

Describe the process for becoming a tax-exempt organization.Why do you believe it is important for an accountant to understand this process?

Accepted Answer

The answer of Describe the process for becoming a tax-exempt...

Question 19

A good measure of whether a not-for-profit organization is a "going concern" and can sustain its operations into the future is

Accepted Answer

The percentage of unrestricted net assets to operating expenses is a good measure of the organization's financial viability as it shows how much cushion the organization has to sustain its operations in the future. An organization with a high percentage of unrestricted net assets to operating expenses is more likely to survive in the long run compared to an organization with a low percentage.

Question 20

A good measure of whether a not-for-profit organization is "liquid" and can meet its short-term obligations is

Accepted Answer

Current assets divided by current liabilities gives the current ratio, which measures the ability of a not-for-profit to meet its short-term obligations. A current ratio of 1 or greater is generally considered to be a good indication of liquidity. Option A measures program efficiency, option B measures financial sustainability, and option D measures the financial resilience of an organization. However, these do not directly measure liquidity.

Quiz 14: Not-For-Profit Organizations-Regulatory, Taxation, and Performance Issues