Engaging in a prohibited transaction can result in an exempt organization being subject to Federal income tax, but such an act cannot cause the entity to lose its exempt status unless the exempt organization repeats the prohibited transaction.

Question

Quizplus · Accepted Answer

Engaging in a prohibited transaction can indeed result in an exempt organization losing its exempt status, not just being subject to Federal income tax. The severity of the violation and the frequency of such transactions can lead to revocation of the exempt status by the IRS.

Engaging in a Prohibited Transaction Can Result in an Exempt