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Exam 23: Exempt Entities

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Question 41

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

A) True
B) False

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Question 42

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If an exempt organization conducts a trade or business that is regularly carried on by the organization,it is subject to the unrelated business income tax (UBIT).

A) True
B) False

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Question 43

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Which of the following are organizations exempt under § 501(c) (3) ?

Which of the following requirements are among the three requirements that must be satisfied for an exempt organization to be subject to the unrelated business income tax?

Relevant factors in the unrelated business income tax (UBIT) rules for determining whether a trade or business is regularly carried on by an exempt organization do not include which of the following?

Hope,Inc.,an exempt organization,owns a factory building that it leases to a taxable corporation for $150,000 per year.Related expenses for Hope are $40,000.Hope's average acquisition indebtedness on the building is $500,000 and the average adjusted basis is $750,000.Calculate Hope's unrelated debt-financed income and expenses.Then indicate the effect of these items on unrelated business taxable income.

Federal agencies exempt from Federal income tax under § 501(c)(1)are not subject to the unrelated business income tax (UBIT).

The unrelated business income tax (UBIT)is designed to treat the entity as if it were subject to the corporate income tax on its unrelated business taxable income,with the highest corporate tax rate (35%)applying.

Watch,Inc.,a § 501(c)(3)exempt organization,solicits contributions through a mail campaign.An executive,who recently completed an executive MBA degree program,recommends that personal address labels be included as an additional way to motivate the potential donor to contribute.The value of these labels is $9.00 per potential donor.What is the effect of the inclusion of the address labels on Watch's unrelated business income?

Soft,Inc.,a § 501(c)(3)organization,has been leasing a building to Polar,Inc.,a taxable entity,for 15 years.The lease terminates in the current tax year.Soft's adjusted basis for the building is $400,000.It sells the building to the Development Partnership,a taxable entity,for $600,000.Selling expenses are $25,000.

Match the following statements with the correct description.

What are the excise taxes imposed on private foundations,and why are they imposed?

Spirit,Inc.,a § 501(c)(3)organization,is classified as a private foundation.It has investment income of $100,000.Calculate Spirit's tax on its investment income.

Which of the following is not an example of an exempt organization?

Which of the following requirements must be satisfied for a bingo game to be classified as not being an unrelated trade or business?

Which requirements must be satisfied for an exempt organization to be classified as an unrelated trade or business? Is being classified as an unrelated trade or business good or bad?

Which of the following is one of the requirements that will enable mortgaged land acquired by an exempt organization for later exempt use to be excluded from debt-financed property,for purposes of the unrelated business income tax?

An exempt entity in no circumstance is subject to Federal income tax.

An exempt organization is located in the state of Nevada.Gambling in Nevada is legal.Therefore,bingo games are conducted by both taxable and tax-exempt organizations.If the net earnings from the bingo games are less than $25,000,the exempt organization is not subject to the unrelated business income tax (UBIT).

An educational organization such as the College of William and Mary that is exempt under § 501(c)(3)cannot be classified as a private foundation.