Teal, Inc., is a private foundation which failed to distribute an adequate amount of income for the exempt purpose of Teal. Which of the following statements is correct?
A)An excise tax in the form of an initial tax at the rate of 10% may be imposed on Teal.
B)An excise tax in the form of an initial tax at the rate of 5% may be imposed on the foundation manager.
C)An excise tax in the form of an additional tax at the rate of 100% may be imposed on Teal.
D)An excise tax in the form of an additional tax at the rate of 50% may be imposed on the foundation manager.
E)None of the statements is correct.

Question

Quizplus · Accepted Answer

According to the regulations, if a private foundation fails to distribute an adequate amount of income for its exempt purpose, an excise tax in the form of an additional tax at the rate of 100% may be imposed on the foundation. Therefore, choice C is correct. Choice A is incorrect because it refers to the initial tax rate for private foundations that engage in prohibited transactions. Choice B and D are incorrect because they refer to the initial tax and additional tax rates for self-dealing transactions.

Teal, Inc, Is a Private Foundation Which Failed to Distribute an an Adequate