Question 1

Faith Church, a § 501(c)(3) organization, operates a bingo game two times each week to raise money to support the youth activities of the church. For the current year, net proceeds from the bingo game are $900,000.
a.Determine the tax consequences for Faith Church if the bingo game is conducted in a jurisdiction where for-profit bingo games are illegal, and where the bingo game is legal for exempt entities.
b.Determine the tax consequences for Faith Church if the bingo game is conducted in a jurisdiction where bingo games are legal for both for-profit and exempt entities.

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Question 2

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

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Question 3

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

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Question 4

Discuss benefits for which an exempt organization may be eligible, other than exemption from Federal income tax.

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Question 5

Ice, Inc., a § 501(c)(3) organization, has been leasing a building to Soft, Inc., a taxable entity, for 15 years. The lease terminates in the current tax year. Ice's adjusted basis for the building is $225,000. It sells the building to the Development Partnership, a taxable entity, for $440,000. Selling expenses are $26,400. Calculate the effect of the sale on Ice's UBTI.

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Question 6

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

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Question 7

What are the common characteristics of organizations that receive exempt status?

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Question 8

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

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Question 9

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

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Question 10

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

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Question 11

Why are some organizations exempt from Federal income tax?

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Question 12

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 $9.95 per potential donor. What is the effect of the inclusion of the address labels on Watch's unrelated business income?

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Question 13

Pearl Inc., a tax-exempt organization, leases land, building, and machinery to Purple Partnership for a 5-year period.
The rental income from the land and building is $100,000, with related expenses of $40,000. The rental income from the machinery is $9,000, with related expenses of $3,000. What adjustment must be made to net unrelated business income?

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Question 14

Are organizations that qualify for exempt organization status completely exempt from Federal income taxation?

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Question 15

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?
b. change if the amount of the payment was $7,500 instead of $20,000?
c. Would your answer in

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Question 16

Arbor, Inc., an exempt organization, leases land, building, and machinery to a tenant for a 5-year period. The rent income for the land and building is $400,000 per year and that from the related machinery is $80,000 per year. Expenses incurred by Arbor for the land and building during the year are $60,000, and those for the machinery are $36,000. Net unrelated business income, which includes the above rental income and expenses, is $800,000. Calculate Arbor's unrelated business taxable income.

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Question 17

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.

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Question 18

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

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Question 19

City, Inc., an exempt organization, has included among other amounts the following in calculating net unrelated business income of $500,000.
  
The only expenses incurred associated with these items are rental expenses (which includes depreciation of $10,000) of $15,000. Calculate City, Inc.'s UBTI.

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Question 20

Define a private foundation.

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Quiz 23: Exempt Entities