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Exam 15: Exempt Entities

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Question 21

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Define average acquisition indebtedness with respect to debt-financed property.

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Average acquisition indebtedness is the ...

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Question 22

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Discuss any negative tax consequences that result from an exempt organization being classified as a private foundation.

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Match the following statements. -The trade or business is not substantially related to the exempt purpose of the organization.

What is the purpose of the unrelated business income tax?

If an exempt organization is required to file an annual information return, on what form is it filed?

Agnes is aware that a feeder organization is subject to Federal income taxation. She wonders whether an organization otherwise taxable as a feeder organization can avoid such status if it remits less than 80% of its profits to the § 501(c)(3) entity.

Match the following tax forms. -Form 990-PF

Give an example of the indicated types of exempt organizations. -Not an exempt organization

What are the common characteristics of organizations that receive exempt status?

The purpose of the excise tax imposed on a private foundation for failure to distribute sufficient levels of income is to motivate the foundation to distribute more of its income for application to exempt purposes.

The excise taxes such as the tax on self-dealing and the tax on excess business holdings are imposed on exempt organizations classified as private foundations. The taxes are not imposed on exempt organizations classified as public charities.

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

A § 501(c) (3) organization that otherwise would be classified as a private foundation can avoid such classification if it satisfies:

An intermediate sanction imposed by the IRS on an exempt organization is a greater sanction than revocation of exempt status.

How can an exempt organization, otherwise classified as a private foundation, become a public charity?

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?

To satisfy the broadly supported provision to avoid classification as a private foundation, the exempt organization must satisfy both an external support test and an internal support test. Under the internal support test, more than one-third of the exempt organization's support for the taxable year must come from gross investment income and unrelated business taxable income.

Third Church operates a gift shop in its parish house. The total income of the church is $800,000. Of this amount, $300,000 comes from offerings and $500,000 comes from the net income of the gift shop. The gift shop operations are conducted by six full-time, paid employees. Which of the following statements is correct?

Ice, Inc., a § 501(c)(3) organization, has been leasing a building to Soft, Inc., a taxable entity, for 15 years. The lease terminates in the current tax year. Ice's adjusted basis for the building is $225,000. It sells the building to the Development Partnership, a taxable entity, for $440,000. Selling expenses are $26,400. Calculate the effect of the sale on Ice's UBTI. ? ?

Which of the following attributes are associated with exempt organizations?