Tan, Inc., a tax-exempt organization, has $65,000 of net unrelated business income. Total charitable contributions (all associated with the unrelated trade or business) are $7,500. Assuming that the $7,500 was deducted in calculating net unrelated business income, what is Tan's unrelated business taxable income?
A) $57,500
B) $65,250
C) $66,000
D) $72,500

Question

Quizplus · Accepted Answer

To calculate unrelated business taxable income, first subtract any allowable deductions directly connected to the unrelated trade or business. In this case, the charitable contributions of $7,500 are deductible. Therefore, the unrelated business taxable income is $65,000 - $7,500 = $57,500. However, the question asks for the unrelated business taxable income assuming the charitable contributions were deducted in calculating net unrelated business income. This means we need to add the $7,500 back to get the unrelated business taxable income, which is $57,500 + $7,500 = $65,000. Therefore, the correct answer is B.

Tan, Inc, a Tax-Exempt Organization, Has $65,000 of Net Unrelated Business