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Exam 23: Exempt Entities

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Question 51

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Restful,Inc.,a § 501(c)(3) exempt organization,hires a registered lobbyist to promote its position on pending legislation.For the year,its lobbying expenses are $100,000.Restful makes the § 501(h) election.The lobbying nontaxable amount is $90,000. a.Will the lobbying expenses result in Restful losing its exempt status? b.Calculate the amount of any tax that Restful must pay associated with the lobbying expenses.

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Question 52

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Unrelated debt-financed income,net of the unrelated debt-financed deductions,is subject to the unrelated business income tax only if the exempt organization is a private foundation.

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Question 53

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

To what types of organizations does the UBIT apply?

Which of the following exempt organizations are required to file Form 990 (Return of Organization Exempt from Income Tax) ?

Maroon,Inc.,a tax-exempt organization,leases a building and equipment to Brown Partnership.The rental income from the building is $100,000 and from the equipment is $9,000.Rental expenses are $40,000 for the building and $4,000 for the equipment.What adjustment must be made to net unrelated business income?

To satisfy the "not for profit" requirement for exempt status,the entity may not be engaged in a trade or business.

For an exempt organization to be subject to the unrelated business income tax,the trade or business must not be substantially related to the exempt purpose of the organization.

A feeder organization is an exempt organization that provides funding for nutritional programs for children.

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

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?

To be classified as a private foundation,the exempt status of an organization can be provided under either § 501(c)(1) or § 501(c)(3).

Medical,Inc.,a § 501(c)(3) exempt organization,engages in an excess benefit transaction,such that the intermediate sanctions rules may apply.The amount of the excess benefit is $50,000.For the organization management,the participation in the excess benefit transaction was not willful and was due to reasonable cause.Calculate the amount of the excise tax (first-level tax) imposed under the intermediate sanctions provision.

Match the following statements. a.Exempt from tax on unrelated business. b.Inappropriate definition. c.Exempt organization may be subject to the tax on unrelated business income. d.Annual information return of an exempt organization that is required to file a return and which is not a private foundation. e.Appropriate definition. f.Annual information return of a private foundation. -Debt-financed income is the net income from investment assets.

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.

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

For purposes of the unrelated business income tax (UBIT) ,land that is acquired by the exempt organization for later exempt-use is excluded from the definition of debt-financed property if certain requirements are satisfied.Which of the following is not a requirement?

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

If an exempt organization is required to file an annual information return,on what form is it filed?

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. ​ Miracle is eligible for and thus makes the § 501(h) election.It calculates the lobbying nontaxable amount to be $100,000 ($500,000 exempt purpose expenditures × 20%).The total lobbying expenditures for the year were $115,000.Calculate Miracle's tax on excess lobbying expenditures.