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Exam 15: Exempt Entities

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Question 51

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Under what circumstances are bingo games not treated as an unrelated trade or business?

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A bingo game is not an unrelated trade o...

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Question 52

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First Americans, Inc., a § 501c)3) organization, operates a museum that depicts the lives of a tribe of Native Americans. It charges an admission fee but also finances its operations through endowment income, contributions, and gift shop sales. The gift shop is operated by 50 volunteers and the museum is operated by 15 employees. Revenue by source is: $\begin{array}{lr}\text { Admission fees } & \$ 700,000 \\\text { Endowment income } & 75,000 \\\text { Gift shop net income } & 300,000 \\\text { Contributions } & 100,000\end{array}$ a. Determine the amount of First Americans' unrelated business income UBI). b. Determine the amount of First American's unrelated business income tax UBIT).

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Thus, First Americans, Inc., r...

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Question 53

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

The income from a bingo game or a casino game conducted by an exempt organization may be unrelated business income.

A § 501c)3) organization exchanges its membership lists with another exempt organization. What are the Federal income tax consequences?

Describe how a public charity can be eligible to make lobbying expenditures without losing its tax exemption.

All organizations that are exempt from Federal income tax are "charities."

Maroon, Inc., a tax-exempt organization, leases a building and equipment to Brown Partnership. The rental income from the building is $100,000 and from the equipment is $9,000. Rental expenses are $40,000 for the building and $4,000 for the equipment. What adjustment must be made to net unrelated business income?

Which of the following attributes are associated with exempt organizations?

To provide the greatest Federal income tax benefits for its donors, Orchestra would prefer to be a:

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

One of the requirements for an exempt organization to be classified as an unrelated trade or business is that the trade or business is not substantially related to the exempt purpose of the organization. How can an exempt organization avoid satisfying this requirement?

General requirements for exempt status include the organization serving the common good and the organization being a not-for-profit entity.

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

Match the following statements. -Debt-financed income is the net income from investment assets.

The trade or business of selling merchandise where substantially all of the merchandise has been received as contributions or gifts is not subject to the unrelated business income tax.

All of the stock of Hot Dog, Inc., a fast-food franchise operating in nine southeastern states, is owned by Winsome America, Inc., a § 501c)3) organization. The stock was received last year as an inheritance from Rob, the entrepreneur who founded the chain. During the current year, Hot Dog reports profits before taxes and taxable income of $8 million. Hot Dog distributes $5 million to its parent, and it retains the balance for expansion purposes. a. What are the tax consequences to Hot Dog and to Winsome America? a. change if Hot Dog distributes $8 million to Winsome, rather than $5 million? b. How would your answer in

A feeder organization is an exempt organization that provides funding for nutritional programs for children.

Help, Inc., a tax-exempt organization, incurs lobbying expenses of $275,000 during the tax year. Help is eligible for and makes the § 501h) lobbying expenditure election. During the year, Help spends $1,200,000 carrying out its exempt mission. a. Will the lobbying expense result in Help losing its exempt status? b. Calculate the amount of any tax that Help must pay associated with its lobbying expenses.

To satisfy the broadly supported provision to avoid classification as a private foundation, an 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.