Question 1

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

Accepted Answer

The best measure of whether a not-for-profit organization is "liquid" and can meet its short-term obligations is the current ratio, which is calculated by dividing current assets by current liabilities. This ratio indicates the organization's ability to pay off its current debts with its current assets. A current ratio of 1 or above is generally considered good, indicating that the organization has enough current assets to meet its short-term obligations. Options A, B, and D do not specifically address liquidity or short-term obligations.

Question 2

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 activities listed (A, B, and C) are either related to the organization's exempt purpose, are volunteer-driven, or involve the sale of donated goods, all of which are generally excluded from unrelated business income tax (UBIT) according to IRS rules for nonprofits.

Question 3

Income a not-for-profit organization earns from a rental property on which it has a mortgage is subject to unrelated business income tax.

Accepted Answer

Income earned by a not-for-profit organization from a rental property on which it has a mortgage is considered unrelated business income and is subject to unrelated business income tax.

Question 4

A nongovernmental tax-exempt organization must complete a Form 990 and send it to the Internal Revenue Service:

Accepted Answer

According to the IRS, a nongovernmental tax-exempt organization must file Form 990 if they are not a religious organization and have gross receipts of $5,000 or more each year. This is regardless of whether or not they have unrelated business income.

Question 5

A not-for-profit typically has gross receipts of $4,500 or less each year.According to the IRS it would not have to file with the IRS to be considered tax-exempt under Sec.501(c)(3).

Accepted Answer

According to the IRS, a not-for-profit organization with gross receipts of $4,500 or less each year does not have to file with the IRS to be considered tax-exempt under Sec. 501(c)(3).

Question 6

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

Providing immunizations to children is a related activity for a human service organization. However, selling sweatshirts at a considerable profit is an unrelated activity that generates unrelated business income.

Question 7

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

Accepted Answer

Propaganda specifically refers to information that is biased and often based on false or misleading information, designed to influence and manipulate people's beliefs and opinions. Political influence, legislation, and lobbying all have the potential to be biased, but they do not necessarily involve the same level of misinformation as propaganda.

Question 8

Which of the following not-for-profit organizations is most likely to be tax-exempt under IRC Sec.501(c)(3)?

Accepted Answer

Survivors of Breast Cancer Club is most likely to be tax-exempt under IRC Sec. 501(c)(3) as it is a social welfare organization, which is one of the categories of tax-exempt organizations under this section. Beta Kappa Alpha Sorority is a social organization and Regional Association of Tree Trimmers is a trade association, neither of which qualifies for tax-exempt status under this section. Peaceful Dreams Cemetery Association may potentially qualify for tax-exempt status under a different section, such as 501(c)(13) or 501(c)(4), but not under 501(c)(3).

Question 9

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

Accepted Answer

Public disclosure rules require tax-exempt not-for-profit organizations to make available a copy of their Form 990 to the public for a period of up to three years. The Form 990 is a tax return document that provides information about the organization's finances, activities, and governance. This requirement helps ensure transparency and accountability for nonprofits that receive tax-exempt status.

B, C, and D are incorrect because posting articles of incorporation and by-laws on their website, providing minutes to board meetings to any person who requests it within 90 days of the meeting, or making available a copy of Form 990-T instead of Form 990 are not requirements under public disclosure rules.

Question 10

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 is a good measure of efficiency in fund-raising efforts because it calculates the costs of fundraising in relation to the amount of money raised from public support. If a not-for-profit organization is spending too much on fundraising, it may suggest that its efforts are not effective or that it is not using its resources well. A lower fund-raising expense as a percentage of public support indicates more efficient use of resources.

Question 11

A program effectiveness ratio is helpful in assessing whether a not-for-profit is using its resources to accomplish its mission or goals.

Accepted Answer

A program effectiveness ratio is a measure used to evaluate the effectiveness of a not-for-profit organization in achieving its mission or goals. It calculates the ratio of program expenses to total expenses and assesses whether the organization is using its resources efficiently to achieve its objectives. Therefore, it is true that a program effectiveness ratio is helpful in assessing whether a not-for-profit is using its resources to accomplish its mission or goals.

Question 12

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 whether a not-for-profit organization is able to sustain its operations into the future. This ratio shows how much of the organization's assets are available to cover current and future operating expenses. A higher percentage indicates that the organization has a stronger financial position and is more likely to be a going concern.

Question 13

Which of the following is a reason why a not-for-profit organization might fail to qualify for tax-exempt status?

Accepted Answer

Not-for-profit organizations can only qualify for tax-exempt status if their primary purpose is charitable, educational, religious, scientific, or literary. Promoting the election of a candidate would be considered political activity and therefore disqualify the organization from tax-exempt status. Choices A, B, and D are all potential reasons why a not-for-profit organization might not maintain its tax-exempt status, but they do not necessarily prevent an organization from initially qualifying.

Question 14

A large not-for-profit organization expended $1,250,000 in direct lobbying during the current year.As long as the $1,250,000 did not exceed 2 percent of the organization's exempt purpose expenditures,the amount is allowable according to the Internal Revenue Code.

Accepted Answer

The answer of A large not-for-profit organization expended $1,250,000 in...

Question 15

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

The IRS can impose intermediate sanctions on transactions between a not-for-profit organization and its executive officer if they involve excessive compensation, more than fair rental value for property owned by the officer, or a bargain on the sale of assets. However, providing fringe benefits comparable to those given to all employees is not subject to intermediate sanctions.

Question 16

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 public charity receives its support primarily from a large number of individuals or corporations, as opposed to a private foundation that typically receives its support from a single source, such as a family or corporation. A public foundation is not a recognized term in the nonprofit sector. A voluntary health and welfare organization is a type of public charity that focuses on providing health and human services.

Question 17

Which of the following is not a statement about tax-exempt organizations?

Accepted Answer

The answer of Which of the following is not a...

Question 18

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 for large not-for-profit organizations, as there is no evidence to suggest that this was a primary goal of the overhaul. Rather, the primary goals of the overhaul were to enhance transparency about the organization, allow the IRS to efficiently assess noncompliance, and minimize the burden of filing on tax-exempt organizations.

Question 19

A disqualified person is a person who has violated and been sanctioned under the Internal Revenue Code.

Accepted Answer

A disqualified person in the context of the Internal Revenue Code primarily refers to individuals or entities that have a significant influence over a tax-exempt organization, such as officers, directors, or substantial contributors, rather than someone who has been sanctioned for violating the code.

Question 20

A good measure that can be used to help assess whether a not-for-profit organization is spending too much on overhead,such as general and administrative expenses,is:

Accepted Answer

The percentage of program expenses to total expenses is a good measure to assess whether a not-for-profit organization is spending too much on overhead. This ratio measures the proportion of total expenses that are being spent on the programs and services that the organization provides, as opposed to overhead expenses such as administrative salaries, rent, and utilities. A higher percentage of program expenses to total expenses indicates that more of the organization's resources are being allocated to its mission and programs, rather than administrative overhead.

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