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Exam 14: Exempt Entities

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Question 71

Multiple Choice

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Which of the following taxes may be imposed on a private foundation?

A) Tax on self-dealing.
B) Tax on failure to distribute income.
C) Tax on excess business holdings.
D) Tax on taxable expenditures.
E) A private foundation can be subject to all of these taxes.

F) A) and B)
G) None of the above

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Question 72

Multiple Choice

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Teal,Inc.,is a private foundation which failed to distribute an adequate amount of income for the exempt purpose of Teal.Which of the following statements is correct?

A) An excise tax in the form of an initial tax at the rate of 5% may be imposed on Teal.
B) An excise tax in the form of an initial tax at the rate of 2.5% may be imposed on the foundation manager.
C) An excise tax in the form of an additional tax at the rate of 100% may be imposed on Teal.
D) An excise tax in the form of an additional tax at the rate of 50% may be imposed on the foundation manager.
E) None of the statements is correct.

F) C) and D)
G) All of the above

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Question 73

Multiple Choice

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Which of the following excise taxes are imposed on the private foundation because it engages in prohibited transactions?

The excise tax imposed on a private foundation's excess business holdings is in effect an audit fee to defray IRS expenses.

A corporate sponsorship payment that is contingent on attendance at a sporting event increases the amount of unrelated business income.

The League of Women Voters is a § 501(c)(3)organization.

Give an example of the indicated types of exempt organizations. a.League of Women Voters. b.Teachers' association. c.American Plywood Association. d.Six Flags over Texas theme park. e.Salvation Army. -§ 501(c)(6)business league

Revenue generated by an exempt organization from the distribution of low-cost items is not income from an unrelated trade or business.

Give an example of the indicated types of exempt organizations. a.League of Women Voters. b.Teachers' association. c.American Plywood Association. d.Six Flags over Texas theme park. e.Salvation Army. -§ 501(c)(5)labor organization

Match the following statements. a.Carries on a trade or business for the benefit of an exempt organization, remits its profits to the exempt organization, and is not exempt from Federal income tax. b.May be subject to some Federal income taxation and classification may adversely affect amount of charitable contributions received. c.Tax imposed for engaging in transactions with disqualified persons. d.Enables certain exempt organizations to engage in lobbying activities on a limited basis. e.Tax imposed on investments that enable a private foundation to control unrelated businesses. -Tax on excess business holdings

Which of the following statements is correct?

For each of the following taxes which are imposed on private foundations, match the appropriate initial tax or additional tax. a.5% initial tax and 25% additional tax on private foundation. b.15% initial tax and 100% additional tax on private foundation. c.100% additional tax on private foundation and 50% additional tax on foundation manager. d.5% initial tax and 200% additional tax on private foundation. e.5% initial tax and 200% additional tax on the disqualified person. -Tax on failure to distribute

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

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).

An exempt organization in certain circumstances is subject to the Federal income tax.

What is the purpose of the unrelated business income tax?

The only purpose of the Federal income tax law is to raise revenue.

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

For purposes of the unrelated business income tax (UBIT),a trade or business consists of any activity conducted for the production of income through the sale of merchandise or the performance of services for which profits have been earned during at least two of the five previous years.

Unless the "widely available" provision is satisfied,a § 501(c)(3)exempt organization (excluding churches and private foundations)must make copies of the following available to the general public: Form 990 (Return of Organization Exempt from Income Tax)and Form 1023 [Application for Recognition of Exemption under § 501(c)(3)] or Form 1024 [Application for Recognition of Exemption under § 501(a)].