Question 1

Wonder,Inc. ,a private foundation,makes a speculative investment of $800,000 that puts the foundation assets at risk.Calculate the tax on jeopardizing investments.Assume that corrective action is taken so that the additional tax does not apply.

Accepted Answer

The answer of Wonder,Inc. ,a private foundation,makes a speculative investment...

Question 2

Which of the following exempt organizations are required to file Form 990 (Return of Organization Exempt from Income Tax)?
A)Federal agencies.
B)Churches.
C)Exempt organizations whose annual gross receipts do not exceed $50,000.
D)Private foundations.
E)None of these entities must file Form 990.

Accepted Answer

The answer of Which of the following exempt organizations are...

Question 3

Help,Inc. ,a tax-exempt organization,incurs lobbying expenses of $275,000 during the tax year.Help is eligible for and makes the § 501(h)lobbying expenditure election.During the year,Help spends $1,200,000 carrying out its exempt mission.

Accepted Answer

The answer of Help,Inc. ,a tax-exempt organization,incurs lobbying expenses of...

Question 4

Lemon,Inc. ,a private foundation,engages in a transaction with a disqualified person in the amount of $300,000.Calculate the tax on self-dealing.Assume that corrective action is taken so that the additional tax does not apply.

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Question 5

Miracle,Inc. ,is a § 501(c)(3)organization involved in medical research.Based on its expectation that proposed legislation will adversely affect the funding supporting its mission,Miracle hires a lobbyist to work in Washington to represent its views.

Accepted Answer

The answer of Miracle,Inc. ,is a § 501(c)(3)organization involved in...

Question 6

Assist,Inc. ,a § 501(c)(3)organization,receives the following sources of support during the tax year.
  Is Assist,Inc. ,classified as a private foundation?

Accepted Answer

The answer of Assist,Inc. ,a § 501(c)(3)organization,receives the following sources...

Question 7

Wett,Inc. ,a § 501(c)(3)exempt organization,acquired all the stock of a for-profit corporation for $150,000.Wett is a private foundation.The acquired corporation was not a related business.Calculate the tax on excess business holdings.Assume that corrective action is taken so that the additional tax does not apply.

Accepted Answer

The answer of Wett,Inc. ,a § 501(c)(3)exempt organization,acquired all the...

Question 8

Give an example of the indicated types of exempt organizations.

Accepted Answer

The answer of Give an example of the indicated types...

Question 9

Which of the following is one of the requirements that will enable mortgaged land acquired by an exempt organization for later exempt use to be excluded from debt-financed property,for purposes of the unrelated business income tax?
A)The principal purpose of acquiring the land is for investment.
B)The land is used within ten years of the acquisition date in the organization's exempt purpose.
C)The land is located in the United States.
D)Only a.and b.
E)None of the above.

Accepted Answer

In order for mortgaged land acquired by an exempt organization for later exempt use to be excluded from debt-financed property, the land must be used within ten years of the acquisition date in the organization's exempt purpose. Therefore, choice B is the correct answer. Choice A is incorrect because the principal purpose of acquiring the land should not be for investment, and choice C and E are irrelevant. Choice D is incorrect because only choice B is necessary for the land to be excluded from debt-financed property.

Question 10

Acquisition indebtedness consists of the unpaid amounts of which of the following for debt-financed property?
A)Debt incurred in acquiring or improving the property.
B)Debt incurred to enable the organization to carry out its exempt purpose.
C)Debt incurred to enable the exempt organization to acquire a feeder organization.
D)Only a.and b.
E)a. ,b. ,and c.

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Question 11

Nice,Inc. ,a § 501(c)(3)organization,inherited 100% of the stock of Aggressive,Inc. ,a for-profit entity,at the beginning of the year.Although Nice plans on selling the stock of Aggressive,a buyer has not yet been located.Aggressive's taxable income for the year is $600,000.Aggressive distributed a dividend of $450,000 to Nice at the beginning of December.Determine the tax consequences for the taxable income and the dividend payment to Aggressive,Inc.

Accepted Answer

The answer of Nice,Inc. ,a § 501(c)(3)organization,inherited 100% of the...

Question 12

Spirit,Inc. ,a § 501(c)(3)organization,is classified as a private foundation.It has investment income of $150,000.Calculate Spirit's tax on its investment income.

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The answer of Spirit,Inc. ,a § 501(c)(3)organization,is classified as a...

Question 13

To maintain exempt status,an organization must do which of the following:
A)Satisfy only an organizational test.
B)Satisfy only an operational test.
C)Satisfy both an organizational test and an operational test.
D)Satisfy a financial test.
E)Once exempt status is granted,it will continue regardless of whether the organizational test and the operational test are satisfied.

Accepted Answer

To maintain exempt status, an organization must satisfy both an organizational test and an operational test. The organizational test ensures that the organization is organized exclusively for exempt purposes, while the operational test ensures that the organization operates exclusively for exempt purposes. Failure to satisfy either test could result in the loss of exempt status. A financial test is not relevant to maintaining exempt status, and exempt status is not guaranteed to continue indefinitely without meeting the required tests.

Question 14

Which of the following statements regarding the disclosure Regulations is correct?
A)Posting the required tax forms on the Internet is an acceptable technique for satisfying the "widely available requirement."
B)Forms 990 and 1023 must be readily available to the general public.
C)If an individual requests a copy of the required tax forms in writing,the exempt entity must provide a copy within 30 days.
D)Only a.and b.are correct.
E)a. ,b. ,and c.are all correct.

Accepted Answer

Posting the required tax forms on the Internet is an acceptable technique for satisfying the "widely available requirement" (a). Forms 990 and 1023 must be readily available to the general public (b). If an individual requests a copy of the required tax forms in writing, the exempt entity must provide a copy within 30 days (c). Therefore, all three statements are correct, and the best choice is E ("a., b., and c. are all correct").

Question 15

Warmth,Inc. ,a private foundation,makes an expenditure of $800,000 that should not be made by a private foundation.Calculate the tax on taxable expenditures.Assume that corrective action is taken so that the additional tax does not apply.

Accepted Answer

The answer of Warmth,Inc. ,a private foundation,makes an expenditure of...

Question 16

For purposes of the unrelated business income tax (UBIT),land that is acquired by the exempt organization for later exempt-use is excluded from the definition of debt-financed property if certain requirements are satisfied.Which of the following is not included in the requirements?
A)The principal purpose of acquiring the land is for use (substantially all)in achieving the organization's exempt purpose.
B)The fair market value of the land is not over 50% of the fair market value of land presently owned by the exempt organization.
C)The use of the land by the exempt organization will begin within ten years of the acquisition date.
D)At the date the land is acquired,it is located in the neighborhood of other property of the organization for which substantially all the use is for achieving the organization's exempt purpose.
E)All of the above are requirements.

Accepted Answer

The requirements for excluding the land from the definition of debt-financed property include options A, C, and D, but not option B. The fair market value of the land is not a factor in determining whether it qualifies for this exclusion.

Question 17

Which of the following statements are correct?
A)If an exempt organization has annual gross receipts of less than $50,000,it files an e-Postcard (Form 990-N).
B)Private foundations must file Form 990-PF (Return of Private Foundation).
C)An exempt organization with less than $250,000 in gross receipts may file a Form 990-EZ.
D)Only a.and b.are correct.
E)a. ,b. ,and c.all are correct.

Accepted Answer

A) is correct: If an exempt organization has annual gross receipts of less than $50,000, it files an e-Postcard (Form 990-N).
B) is correct: Private foundations must file Form 990-PF (Return of Private Foundation).
C) is correct: An exempt organization with less than $250,000 in gross receipts may file a Form 990-EZ.

Question 18

Medical,Inc. ,a § 501(c)(3)exempt organization,engages in an excess benefit transaction.The amount of the excess benefit is $200,000.For the organization management,the participation in the excess benefit transaction was not willful and was due to reasonable cause.Calculate the amount of the excise tax (first-level tax)imposed under the intermediate sanctions provision.

Accepted Answer

The answer of Medical,Inc. ,a § 501(c)(3)exempt organization,engages in an...

Question 19

Which of the following statements regarding exempt organization filing requirements is incorrect?
A)Churches are required to file Form 990 (Return of Organization Exempt from Income Tax)only if its annual gross receipts exceed $50,000.
B)The due date for Form 990 (Return of Organization Exempt from Income Tax)is the fifteenth day of the fifth month after the end of the taxable year,whereas for private foundations the due date for Form 990-PF (Return of Private Foundation)is the fifteenth day of the fourth month after the end of the tax year.
C)Exempt organizations whose annual gross receipts do not exceed $50,000 can file an e-Postcard.
D)Only a.and b.are incorrect.
E)a. ,b. ,and c.are incorrect.

Accepted Answer

All of the statements are incorrect. Churches are generally exempt from filing Form 990, regardless of their gross receipts. The due date for Form 990 is the fifteenth day of the fifth month after the end of the organization's accounting period, whereas for private foundations it is the fifteenth day of the fifth month after the end of the organization's accounting period. Exempt organizations with annual gross receipts of $50,000 or less are generally not required to file Form 990, but instead can file an e-Postcard (Form 990-N).

Question 20

Which of the following are consequences of tax-exempt status?
A)Not necessary to file a Federal income tax return.
B)Generally exempt from Federal income tax.
C)Contributions to the exempt organization are deductible by the donor.
D)Only b.and c.
E)a. ,b. ,and c.

Accepted Answer

The answer of Which of the following are consequences of...

Quiz 15: Exempt Entities

Wonder,Inc. ,a private foundation,makes a speculative investment of $800,000 that puts the foundation assets at risk.Calculate the tax on jeopardizing investments.Assume that corrective action is taken so that the additional tax does not apply.

Which of the following exempt organizations are required to file Form 990 (Return of Organization Exempt from Income Tax) ?

Help,Inc. ,a tax-exempt organization,incurs lobbying expenses of $275,000 during the tax year.Help is eligible for and makes the § 501(h)lobbying expenditure election.During the year,Help spends $1,200,000 carrying out its exempt mission.

Lemon,Inc. ,a private foundation,engages in a transaction with a disqualified person in the amount of $300,000.Calculate the tax on self-dealing.Assume that corrective action is taken so that the additional tax does not apply.

Miracle,Inc. ,is a § 501(c)(3)organization involved in medical research.Based on its expectation that proposed legislation will adversely affect the funding supporting its mission,Miracle hires a lobbyist to work in Washington to represent its views.

Assist,Inc. ,a § 501(c)(3)organization,receives the following sources of support during the tax year. Is Assist,Inc. ,classified as a private foundation?

Give an example of the indicated types of exempt organizations.

Which of the following is one of the requirements that will enable mortgaged land acquired by an exempt organization for later exempt use to be excluded from debt-financed property,for purposes of the unrelated business income tax?

Acquisition indebtedness consists of the unpaid amounts of which of the following for debt-financed property?

Spirit,Inc. ,a § 501(c)(3)organization,is classified as a private foundation.It has investment income of $150,000.Calculate Spirit's tax on its investment income.

To maintain exempt status,an organization must do which of the following:

Which of the following statements regarding the disclosure Regulations is correct?

Warmth,Inc. ,a private foundation,makes an expenditure of $800,000 that should not be made by a private foundation.Calculate the tax on taxable expenditures.Assume that corrective action is taken so that the additional tax does not apply.

For purposes of the unrelated business income tax (UBIT) ,land that is acquired by the exempt organization for later exempt-use is excluded from the definition of debt-financed property if certain requirements are satisfied.Which of the following is not included in the requirements?

Which of the following statements are correct?

Which of the following statements regarding exempt organization filing requirements is incorrect?

Which of the following are consequences of tax-exempt status?