Robin, Inc., a tax-exempt organization, leases a building and equipment to XYZ Corporation. The rental income from the building is $480,000 and from the equipment is $36,000. Rental expenses are $300,000 for the building and $33,000 for the equipment. What adjustment must be made to net unrelated business income?
A)$0.
B)($33,000).
C)($36,000).
D)($183,000).
E)Some other amount.

Question

Quizplus · Accepted Answer

The unrelated business taxable income (UBTI) for a tax-exempt organization is determined by subtracting any allowable deductions from the gross income generated from unrelated business activities. In this case, the gross income from renting the building and equipment is $516,000 ($480,000 + $36,000). The allowable deductions are the rental expenses, which total $333,000 ($300,000 + $33,000). Therefore, the UBTI is $183,000 ($516,000 - $333,000). This means that an adjustment of ($183,000) must be made to the net unrelated business income.