Which of the following statements is correct regarding the unrelated business income tax (UBIT)?
A) To be subject to the UBIT, the exempt organization must conduct a trade or business, the trade or business is not substantially related to the exempt purpose of the organization, and the trade or business is regularly carried on by the organization.
B) To be subject to the UBIT, the exempt organization must conduct a trade or business, the trade or business must be substantially related to the exempt purpose of the organization, and the trade or business must be regularly carried on by the organization.
C) To be subject to the UBIT, the exempt organization must conduct a trade or business, the trade or business is not substantially related to the exempt purpose of the organization, and the trade or business is carried on during more than half the year.
D) An exempt entity that conducts a business that competes with for-profit businesses automatically is subject to the UBIT.
E) None of the above statements is correct.

Question

Quizplus · Accepted Answer

To be subject to the UBIT, an exempt organization must meet three requirements: (1) it must conduct a trade or business, (2) the trade or business is not substantially related to the exempt purpose of the organization, and (3) the trade or business is regularly carried on by the organization. The statement in answer choice A correctly summarizes these requirements. Answer choice B is incorrect because it incorrectly states that the trade or business must be substantially related to the exempt purpose. Answer choice C is incorrect because it includes the additional requirement that the business must be carried on during more than half the year, which is not accurate. Answer choice D is incorrect because it makes a blanket statement that is too broad - merely competing with for-profit businesses does not automatically subject an exempt entity to the UBIT.

Which of the Following Statements Is Correct Regarding the Unrelated