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Exam 15: Exempt Entities

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Question 61

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Some of the excise taxes which may be imposed on private foundations may be imposed on both the private foundation and the foundation manager.

A) True
B) False

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Question 62

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Define a private foundation.

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By default, all exempt entities are priv...

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Question 63

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The Dispensary is a pharmacy that is part of a § 501(c)(3) hospital. Its primary mission is to dispense medicines for hospital patients. In addition, the pharmacy dispenses medicines to former hospital patients for a period of up to 30 days after discharge from the hospital. It does this for the dual purpose of convenience to the former patients (i.e., the closest pharmacy is 6 miles away), and to ensure that the former patients receive the medicines that have been prescribed for them. The Dispensary carefully carries out the policy of the hospital board that no more than 25% of its gross revenues come from former-patient medicine sales. If necessary, in December of each year, sales to former patients are curtailed to assure compliance with this policy. Sales revenue from each of the two sources is as follows for the tax year. $\begin{array}{lr}\text { Medicine dispensed to hospital patients } & \$ 900,000 \\\text { Medicine sal es to former patients } & 100,000\end{array}$ ​ Calculate the amount of The Dispensary's unrelated business income.

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).

Well, Inc., a private foundation, makes a speculative investment of $400,000 that puts the foundation assets at risk. Calculate the tax on jeopardizing investments. Assume that corrective action is taken so that the additional tax does not apply.

Match the following statements. -Bingo games

Match the following statements. -Branded calendars

While the major objective of the Federal income tax law is to raise revenue, social considerations and economic objectives also affect the tax law.

What tax forms are used to apply for exempt status?

General requirements for exempt status include the organization serving the common good and the organization being a not-for-profit entity.

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

Match the following statements. -Form 990.

The due date for the Exempt Organization Business Income Tax Return (Form 990-T) is the fifteenth day of the third month after the end of the taxable year.

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

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? A 501(c)(3) with "net income" does not automatically result in a UBIT classification. They must be conducting a trade or business that is regularly carried on and that is not substantially related to its exempt purpose.

Engaging in a prohibited transaction can result in an exempt organization being subject to Federal income tax, but cannot cause it to lose its exempt status unless the exempt organization repeats the prohibited transaction.

Match the following statements. -Membership lists

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

The unrelated business income tax (UBIT) is calculated by multiplying unrelated business taxable income by the highest corporate tax rate.

If personal property is leased with real property and more than 45% of the rent income under the lease is from personal property, all of the rent income is subject to the unrelated business income tax.