Question 1

Plus, Inc., is a § 501(c)(3) organization. It generates a small amount of net income each year. Ralph, the CEO of Plus, Inc., is concerned that Plus may be subject to the unrelated business income tax. Is there a materiality exception to this tax?

Accepted Answer

The answer of Plus, Inc., is a § 501(c)(3) organization....

Question 2

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?

Accepted Answer

The answer of Which requirements must be satisfied for an...

Question 3

Loyal, Inc., is a §501(c)(3) organization that is not classified as a private foundation. During the current year, it is subject to intermediate sanctions. What other options does the IRS have in dealing with an exempt organization engaging in prohibited transactions?

Accepted Answer

The answer of Loyal, Inc., is a §501(c)(3) organization that...

Question 4

How can an exempt organization, otherwise classified as a private foundation, become a public charity?

Accepted Answer

The answer of How can an exempt organization, otherwise classified...

Question 5

Describe how an exempt organization can be eligible to make lobbying expenditures without losing its tax exemption.

Accepted Answer

The answer of Describe how an exempt organization can be...

Question 6

An eligible § 501(c)(3) organization has made the § 501(h) election to participate in lobbying on a limited basis. If the ceiling on lobbying established in § 501(h) (lobbying nontaxable amount) is exceeded, what are the potential tax consequences to the exempt organization?

Accepted Answer

The answer of An eligible § 501(c)(3) organization has made...

Question 7

In what types of organizations does the UBIT apply?

Accepted Answer

The answer of In what types of organizations does the...

Question 8

Identify the components of the tax model for unrelated business taxable income.

Accepted Answer

The answer of Identify the components of the tax model...

Question 9

Agnes is aware that a feeder organization is subject to Federal income taxation. She wonders whether an organization otherwise taxable as a feeder organization can avoid such status if it remits less than 80% of its profits to the § 501(c)(3) entity.

Accepted Answer

The answer of Agnes is aware that a feeder organization...

Question 10

Support the Pets, Inc., a § 501(c)(3) organization, provides pet food to humane societies. All of the pet food is received as contributions from individuals or from a wholly-owned, for-profit subsidiary (Sales, Inc.), which is in the retail pet food business (i.e., pet food that has been in inventory for over 120 days is transferred to Support the Pets for distributions to humane societies). In addition to the pet food, Sales distributes 75% of its net income each year to Support the Pets.
a. Is Support the Pets or Sales, Inc., a feeder organization?
b. How would your answer change if nearly all of the work of Support the Pets was done by volunteers?

Accepted Answer

The answer of Support the Pets, Inc., a § 501(c)(3)...

Question 11

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

Accepted Answer

The answer of What are the excise taxes imposed on...

Question 12

What is the purpose of the unrelated business income tax?

Accepted Answer

The answer of What is the purpose of the unrelated...

Question 13

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

Accepted Answer

The answer of One of the requirements for an exempt...

Question 14

What are intermediate sanctions and to what types of exempt organizations do they apply?

Accepted Answer

The answer of What are intermediate sanctions and to what...

Question 15

Define "trade or business" for purposes of the unrelated business income tax (UBIT).

Accepted Answer

The answer of Define "trade or business" for purposes of...

Question 16

Discuss any negative tax consequences that result from an exempt organization being classified as a private foundation.

Accepted Answer

The answer of Discuss any negative tax consequences that result...

Question 17

Define a private foundation.

Accepted Answer

The answer of Define a private foundation....

Question 18

What is the purpose of the "broadly supported" exception for an exempt organization being classified as a private foundation?

Accepted Answer

The answer of What is the purpose of the "broadly...

Question 19

Francis is the CEO of Give, Inc., a § 501(c)(3) organization. Francis informs you that the will of a major donor transfers 100% of the stock of Friendly Hot Dogs to Give, Inc. Since Friendly is a profitable entity, Francis would like for Give to continue to own and operate Friendly Hot Dogs. You inform Francis that Friendly would be a feeder organization. Describe for the CEO what a feeder organization is and how it is taxed.

Accepted Answer

The answer of Francis is the CEO of Give, Inc.,...

Question 20

What income and activities are not subject to the feeder organization rules?

Accepted Answer

The answer of What income and activities are not subject...

Quiz 15: Exempt Entities