Question 1

All of the stock of Hot Dog, Inc., a fast food franchise operating in 9 southeastern states, is owned by Welcome America, Inc., a § 501(c)(3) organization. The stock was received last year as an inheritance from Rob, the entrepreneur who founded the chain.
During the current year, Hot Dog reports profits before taxes (this is the same as taxable income) of $8 million. Hot Dog distributes $5 million to its parent, and it retains the balance for expansion purposes.
a. What are the tax consequences to Hot Dog and to Welcome America?
b. How would your answer in a. change if Hot Dog distributes $8 million to Welcome America, rather than $5 million?

Accepted Answer

a. Hot Dog is a feeder organization. The...

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Which of the following qualify as exempt organizations?

Accepted Answer

A)   Federal and related agencies.
B)   Religious, charitable, and educational organizations.
C)   Civic leagues.
D)   Social clubs.
E)   All of the above can be exempt from tax.F) A) and C)
G) A) and D)

Question 4

A feeder organization is exempt from Federal income taxation because it carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt entity.

Accepted Answer

A) True 
 B)False

Question 5

Match the following tax forms.
-Form 4720

Accepted Answer

A)  Return of Private Foundation.
B)  Application for Recognition of Exemption under § 501(c) (3) .
C)  Return of Organization Exempt from Income Tax.
D)  Return of Certain Excise Taxes on Charities and Other Persons.
E)  Application for Recognition of Exemption under § 501(a) .F) Application for Extension of Time.G) A) and B)
H) B) and F)

Question 6

Match the following statements.
-Branded calendars

Accepted Answer

A)  Distribution of such items is not considered an unrelated trade or business if they are "low-cost items".
B)  Is considered an unrelated trade or business if the amount received is contingent upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events.
C)  Is considered an unrelated trade or business if can be conducted by commercial (for-profit)  entities.
D)  A trade or business that consists of either renting or exchanging these with another exempt organization is not an unrelated trade or business.E) B) and C)
F) A) and D)

Question 7

What income and activities are not subject to the feeder organization rules?

Accepted Answer

The following income and activities are ...

Question 8

Match the following tax forms.
-Form 1024

Accepted Answer

A)  Return of Private Foundation.
B)  Application for Recognition of Exemption under § 501(c) (3) .
C)  Return of Organization Exempt from Income Tax.
D)  Return of Certain Excise Taxes on Charities and Other Persons.
E)  Application for Recognition of Exemption under § 501(a) .F) Application for Extension of Time.G) C) and D)
H) A) and F)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Match the following statements.
-Private foundation

Accepted Answer

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.F) B) and E)
G) None of the above

Question 11

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?

Accepted Answer

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

Question 12

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

Accepted Answer

Exempt organizations that are not privat...

Question 13

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.

Accepted Answer

The initial tax on the private...

Question 14

Define average acquisition indebtedness with respect to debt-financed property.

Accepted Answer

Average acquisition indebtedness is the ...

Question 15

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.

Accepted Answer

Net unrelated business income $800,000
N...

Question 16

Match the following statements.
-§ 501(h)  election

Accepted Answer

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.F) A) and C)
G) A) and E)

Question 17

Which of the following requirements must be satisfied for a bingo game to be classified as not being an unrelated trade or business?

Accepted Answer

A)   The bingo game is legal under both state and local law.
B)   The bingo game is conducted by volunteers.
C)   For-profit bingo games ordinarily are not permitted in the jurisdiction.
D)   Only a. and b. must be satisfied.
E)   Only a. and c. must be satisfied.F) A) and B)
G) A) and E)

Question 18

Which of the following are organizations exempt under § 501(c) (3) ?

Accepted Answer

A)   Girl Scouts of America.
B)   Washington and Lee University.
C)   Veterans of Foreign Wars (VFW) .
D)   Only a. and b. are § 501(c) (3)  organizations.
E)   All of the above are § 501(c) (3)  organizations.F) A) and E)
G) B) and D)

Exam 23: Exempt Entities

Which of the following requirements must be satisfied for a bingo game to be classified as not being an unrelated trade or business?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
a. Hot Dog is a feeder organization. The...
View Answer

A feeder organization is exempt from Federal income taxation because it carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt entity.

Correct Answer
verified

Define average acquisition indebtedness with respect to debt-financed property.

Correct Answer
verified
Average acquisition indebtedness is the ...
View Answer

Match the following statements. -§ 501(h) election

Correct Answer
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Match the following tax forms. -Form 4720

Correct Answer
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Match the following statements. -Branded calendars

Correct Answer
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Match the following tax forms. -Form 1024

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

Correct Answer
verified

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?

Correct Answer
verified

Which of the following qualify as exempt organizations?

Correct Answer
verified

What income and activities are not subject to the feeder organization rules?

Correct Answer
verified
The following income and activities are ...
View Answer

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

Correct Answer
verified
Exempt organizations that are not privat...
View Answer

Which of the following are organizations exempt under § 501(c) (3) ?

Correct Answer
verified

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.

Correct Answer
verified
The initial tax on the private...
View Answer

Correct Answer
verified
Net unrelated business income $800,000
N...
View Answer

Match the following statements. -Private foundation

Correct Answer
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Exam 23: Exempt Entities

Which of the following requirements must be satisfied for a bingo game to be classified as not being an unrelated trade or business?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Hot Dog is a feeder organization. The...View AnswerShow Answer

A feeder organization is exempt from Federal income taxation because it carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt entity.

Correct AnswerverifiedShow Answer

Define average acquisition indebtedness with respect to debt-financed property.

Correct AnswerverifiedAverage acquisition indebtedness is the ...View AnswerShow Answer

Match the following statements. -§ 501(h) election

Correct AnswerverifiedShow Answer

Match the following tax forms. -Form 4720

Correct AnswerverifiedShow Answer

Match the following statements. -Branded calendars

Correct AnswerverifiedShow Answer

Match the following tax forms. -Form 1024

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Which of the following qualify as exempt organizations?

Correct AnswerverifiedShow Answer

What income and activities are not subject to the feeder organization rules?

Correct AnswerverifiedThe following income and activities are ...View AnswerShow Answer

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

Correct AnswerverifiedExempt organizations that are not privat...View AnswerShow Answer

Which of the following are organizations exempt under § 501(c) (3) ?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedThe initial tax on the private...View AnswerShow Answer

Correct AnswerverifiedNet unrelated business income $800,000N...View AnswerShow Answer

Match the following statements. -Private foundation

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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a. Hot Dog is a feeder organization. The...
View Answer

Correct Answer
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Correct Answer
verified
Average acquisition indebtedness is the ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The following income and activities are ...
View Answer

Correct Answer
verified
Exempt organizations that are not privat...
View Answer

Correct Answer
verified

Correct Answer
verified
The initial tax on the private...
View Answer

Correct Answer
verified
Net unrelated business income $800,000
N...
View Answer

Correct Answer
verified