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Exam 14: Exempt Entities

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Question 21

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Robin,Inc.,an exempt organization,acquired a building for $400,000 which it will lease to XYZ,Inc.,for $40,000 annually.To finance the acquisition of the building,Robin secures a mortgage on it of $250,000.Advise Robin as to whether it has any unrelated debt-financed income or deductions.

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The building is appropriately classified...

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Question 22

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Which of the following statements is correct?

A) A private foundation is,in general,exempt from Federal income tax.
B) A private foundation may be subject to certain types of Federal income tax.
C) If a broad public support test is satisfied,an exempt organization that otherwise would be classified as a private foundation is not classified as a private foundation.
D) Only b.and c.are correct.
E) a.,b.,and c.are correct.

F) A) and E)
G) D) and E)

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Question 23

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Match the following tax forms. a.Return of Private Foundation. b.Application for Recognition of Exemption under § 501(c)(3). c.Return of Organization Exempt from Income Tax. d.Return of Certain Excise Taxes on Charities and Other Persons. e.Application for Recognition of Exemption under § 501(a). f.Application for Extension of Time. -Form 990-PF

If personal property is leased with real property and more than 50% of the rent income under the lease is from personal property,all of the rent income is subject to the unrelated business income tax.

Which of the following are exempt organizations?

Radio,Inc.,an exempt organization,trains disabled individuals to be radio announcers.Rather than hold a traditional graduation exercise,the graduates compete in a radio announcer contest.Such activities are held four times each year.An admission fee of $10 is charged to the general public to attend the contest.Eight hundred people attended the contest this year,and prizes of $2,000 were given to the top 3 graduates.Calculate the amount of Radio's unrelated business income from this activity.

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

Match the following statements. a.Exempt from tax on unrelated business. b.Inappropriate definition. c.Exempt organization may be subject to the tax on unrelated business income. d.Annual information return of an exempt organization which is not a private foundation. e.Appropriate definition. f.Annual information return of a private foundation. -Debt-financed income is the net income from debt financed property.

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

Join,Inc.,a § 501(c)(3)exempt organization,engages in an excess benefit transaction.The amount of the excess benefit is $90,000.Calculate the amount of the excise tax (first-level tax)imposed under the intermediate sanctions provision.

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

Wonder,Inc.,a § 501(c)(3)exempt organization,acquired all the stock of a for-profit corporation for $100,000.Wonder is a private foundation.The acquired corporation was not a related business.Calculate the tax on excess business holdings.Assume that corrective action is taken so that the additional tax does not apply.

An exempt educational organization is permitted to make lobbying expenditures if the payments relate to education or charity and do not exceed $25,000.

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

While engaging in a prohibited transaction can result in an exempt organization being subject to tax,it will not result in an exempt organization losing its exempt status.

Define a qualified corporate sponsorship payment.

Midnight Basketball,Inc.,an exempt organization that organizes and conducts basketball games for youths ages 10-13,receives a $20,000 contribution from Brown Shoe Company.Midnight agrees to put Brown's logo on the cover of its monthly newsletter. a.Is the contribution unrelated business income to Midnight? b.Assume that instead of putting Brown's logo on the cover of its newsletter, Midnight agrees to include a statement in the newsletter that youth playing in the games conducted by Midnight wear only shoes manufactured by Brown. Is the contribution unrelated business income to Midnight?

Match the following tax forms. a.Return of Private Foundation. b.Application for Recognition of Exemption under § 501(c)(3). c.Return of Organization Exempt from Income Tax. d.Return of Certain Excise Taxes on Charities and Other Persons. e.Application for Recognition of Exemption under § 501(a). f.Application for Extension of Time. -Form 2758

Give an example of the indicated types of exempt organizations. a.League of Women Voters. b.Teachers' association. c.American Plywood Association. d.Six Flags over Texas theme park. e.Salvation Army. -Not an exempt organization

Match the following statements with the correct description. a.Exempt organization under § 501(c)(3). b.May not be subject to Federal income tax. c.Permits limited lobbying activities. d.Exempt organization under § 501(c)(7). e.Carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt organization. -Feeder organization