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Exam 23: Exempt Entities

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Question 21

True/False

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The purpose of the excise tax imposed on a private foundation for failure to distribute sufficient levels of income is to motivate the foundation to distribute more of its income for application to exempt purposes and thus be classified as a feeder organization.

A) True
B) False

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Question 22

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Which of the following statements is correct?

A) Exempt organizations cannot engage in significant levels of lobbying activities.
B) Certain exempt organizations can elect to engage in lobbying activities on a limited basis.
C) Churches can engage in lobbying activities on an unlimited basis because of the separation of church and state provision.
D) Only a.and b.are correct.
E) Only a.and c.are correct.

F) B) and D)
G) A) and B)

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Question 23

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Which of the following statements regarding exempt organization filing requirements is incorrect?

Even though a church is not required to obtain IRS approval of its exempt status,it still must file Form 990 (Return of Organization Exempt from Income Tax)annually.

Which of the following are available options for the IRS in dealing with an exempt organization entering into prohibited transactions?

If an exempt organization is subject to intermediate sanctions,it forfeits its exempt status.

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

George is running for mayor of Culpepper.The members of Third Church adamantly oppose his candidacy.They would like to run a political advertisement in the local newspaper opposing his candidacy.The newspaper ad would have no effect on Third Church's exempt status because the ad opposes George;it does not support his opponent.

Acquisition indebtedness consists of the unpaid amounts of which of the following for debt-financed property?

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

A church that is exempt under § 501(c)(3)cannot be classified as a private foundation.

Miracle,Inc. ,is a § 501(c)(3)organization involved in medical research.Based on its expectation that proposed legislation will adversely affect the funding supporting its mission,Miracle hires a lobbyist to work in Washington to represent its views.

The key factor in determining whether an exempt entity's income from a bingo game is unrelated trade or business income is whether substantially all the work is performed by volunteers.

Which of the following statements is correct?

In calculating unrelated business taxable income,the exempt organization is permitted to deduct only the charitable contributions associated with the unrelated trade or business.

An activity is not an unrelated trade or business for purposes of the unrelated business income tax (UBIT)unless it is profitable.

Debt-financed property consists of all real property of a tax-exempt organization on which there is a mortgage.

Radio,Inc. ,an exempt organization,trains disabled individuals to be radio announcers.Rather than hold a traditional graduation exercise,the graduates compete in a radio announcer contest.Such activities are held four times each year.An admission fee of $10 is charged to the general public to attend the contest.Eight hundred people attended the contest this year,and prizes of $2,000 were given to the top 3 graduates.Calculate the amount of Radio's unrelated business income from this activity.

A trade or business that is operated by an exempt organization which otherwise would be subject to the tax on unrelated business income is exempt from tax,if the profits generated by the trade or business are used by the exempt organization for exempt purposes.

First Americans,Inc. ,a § 501(c)(3)organization,operates a museum which depicts the lives of a tribe of Native Americans.It charges an admission fee,but also finances its operations through endowment income,contributions,and gift shop sales.The gift shop is operated by 60 volunteers and the museum is operated by 10 employees.Revenue by source is: Determine the amount of First Americans' unrelated business income.