Maroon,Inc.,a tax-exempt organization,leases a building and machinery to Brown Partnership.The rental income from the building is $100,000,with related expenses of $40,000.The rental income from the machinery is $9,000,with related expenses of $4,000.What adjustment must be made to net unrelated business income?
A)$0.
B)($60,000).
C)($65,000).
D)($109,000).
E)Some other amount.

Question

Quizplus · Accepted Answer

The net rental income from both the building of $60,000 ($100,000 - $40,000)and the machinery of $5,000 ($9,000 - $4,000)is treated as a negative adjustment ($60,000 + $5,000 = $65,000).The personal property (machinery)is leased with the real property (building),and the personal property rental income ($9,000)is not greater than 10% of the total gross income of $109,000 ($100,000 + $9,000)under the lease.