Blue,Inc.,receives its support from the following sources.

Which of the following statements is correct?
A)Blue, Inc., is a private foundation because it satisfies the external support test and fails the internal support test.
B)Blue, Inc., is not a private foundation because it fails both the internal and external support tests.
C)Blue, Inc., is a private foundation because it satisfies both the external support test and the internal support test.
D)Blue, Inc., is not a private foundation because it satisfies both the external support test and the internal support test.
E)None of the statements is true.

Question

Blue,Inc.,receives its support from the following sources.

Which of the following statements is correct?
A)Blue, Inc., is a private foundation because it satisfies the external support test and fails the internal support test. 
B)Blue, Inc., is not a private foundation because it fails both the internal and external support tests. 
C)Blue, Inc., is a private foundation because it satisfies both the external support test and the internal support test. 
D)Blue, Inc., is not a private foundation because it satisfies both the external support test and the internal support test. 
E)None of the statements is true.

Quizplus · Accepted Answer

Blue,Inc.,would prefer not to be labeled a private foundation.Therefore,the entity needs to receive broad public support.To meet this requirement,it must receive more than one-third of its support in this case from governmental unit A and the general public.However,for this purpose,only $5,000 of the amount received from governmental unit A is counted.Therefore,of the $70,000 support received by Blue,$30,000 ($5,000 + $25,000)is from qualifying sources.So the external support test is satisfied (1/3 F1F1F1S1F1F1F10 $70,000 = $23,333).
In addition,Blue,Inc.,must not receive greater than one-third of its support from gross investment income and net unrelated business taxable income.The internal support test is also satisfied,because only $8,000 of the $70,000 (11%)support is from these sources.

Blue,Inc.,receives Its Support from the Following Sources