Posted: May 13th, 2018

Strayer ACC 317 WK 11 Final Exam

ACC 317 WK 11 Final Exam
1. A church is one of the types of exempt organizations. True False

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

3. All organizations that are exempt from Federal income tax are exempt under § 501(c)(3). True False

4. An exempt entity in no circumstance is subject to Federal income tax. True False

5. An entity satisfies the “not-for-profit” requirement for exempt
status if its total expenses for the year exceed its gross income. True False

6. If an organization qualifies for exempt status for Federal income tax purposes, it is exempt from all Federal income taxes. True False

7. 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. True False

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

9. 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. True False

10. An exempt organization that is eligible to elect under § 501(h)
to engage in lobbying activities on a limited basis incurs no tax
liability from lobbying, if the lobbying expenditures for the tax year
do not exceed the lobbying expenditures ceiling. True False

11. While certain § 501(c)(3) organizations can elect to be permitted to lobby on a limited basis, churches are not eligible to make a § 501(h) election. True False

12. An intermediate sanction imposed by the IRS on an exempt
organization is a greater sanction than revocation of exempt status. True False

13. If an exempt organization owns a feeder organization, the exempt
organization is taxed on the profits of the feeder organization under
the unrelated business income tax (UBIT) rules. True False

14. 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. True False

15. Theater, Inc., an exempt organization, owns a printing company,
Printers, Inc., which remits 85% of its profits (i.e., taxable income of
$100,000) to Theater, Inc. Since Printers remits at least 85% of its
profits to Theater, neither Theater, Inc., nor Printers, Inc., must pay
income tax on this $85,000 ($100,000 ´ 85%). True False

16. An educational organization such as the College of William and
Mary that is exempt under § 501(c)(3) cannot be classified as a private
foundation if its only sources of revenue are from tuition and alumni
contributions. True False

17. The tax consequences to a donor of making a charitable
contribution to an exempt organization classified as a private
foundation may be less favorable than the tax consequences to a donor of
making a charitable contribution to an exempt organization that is not
classified as a private foundation. True False

18. Exempt organizations which are appropriately classified as
private foundations include churches, educational institutions, and
charitable organizations receiving a major portion of their support from
the general public or the U.S., a state, or a political subdivision
thereof. True False

19. To satisfy the broadly supported provision to avoid
classification as a private foundation, the exempt organization must
satisfy both an external support test and an internal support test.
Under the internal support test, more than one-third of the exempt
organization’s support for the taxable year must come from gross
investment income and unrelated business taxable income. True False

20. The excise taxes such as the tax on self-dealing and the tax on
excess business holdings are imposed on exempt organizations classified
as private foundations and are not imposed on exempt organizations
classified as public charities. True False

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

22. 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. True False

23. The excise tax imposed on a private foundation’s investment
income can be imposed as an initial (first-level) tax but cannot be
imposed as an additional (second-level) tax. True False

24. The excise tax imposed on private foundations for excess business
holdings is imposed on investments that enable the private foundation
to control publicly-held rather than privately-held businesses. True False

25. The excise tax that is imposed on private foundations for making
jeopardizing investments is imposed because the foundation has made
speculative investments that put the foundation’s income at risk. True False

26. The general objective of the tax on unrelated business income is
to tax such income as if the entity were a taxable corporation. True False

27. Federal agencies exempt from Federal income tax under § 501(c)(1) are not subject to the unrelated business income tax (UBIT). True False

28. 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. True False

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

30. A profit-related activity of an exempt organization avoids the
unrelated business income tax if greater than 50% of the merchandise
sold had been received as a contribution. True False

31. If an exempt organization conducts a trade or business that is
regularly carried on by the organization, it is subject to the unrelated
business income tax (UBIT). True False

32. An exempt organization that otherwise would be classified as an unrelated trade or businesses will not
be subject to the unrelated business income tax if the individuals
performing substantially all the work of the trade or business do so
without compensation. True False

33. A corporate payment to an exempt organization that qualifies as a
qualified sponsorship payment is not subject to the unrelated business
income tax (UBIT). True False

34. The income from a bingo game or a casino game conducted by an exempt organization may be unrelated business income. True False

35. The key factors in determining whether an exempt entity’s income
from a bingo game is unrelated trade or business income are whether
substantially all the work is performed by volunteers and all of the
prizes to be awarded are received as donations. True False

36. An exempt organization is located in the state of Nevada.
Gambling in Nevada is legal. Therefore, bingo games are conducted by
both taxable and tax-exempt organizations. If the net earnings from the
bingo games are less than $25,000, the exempt organization is not subject to the unrelated business income tax (UBIT). True False

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

38. The activity of exchanging with or renting to other exempt
organizations the exempt organization’s donor or membership list is not
an unrelated trade or business. True False

39. For an activity to be considered as regularly carried on for
purposes of the unrelated business income tax, the activity must be
conducted during the work week (i.e., activities performed on the
weekend are not considered in determining if the activity is regularly
carried on). True False

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

41. 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. True False

42. Personal property rental income is subject to and real property rental income is not subject to the unrelated business income tax. True False

43. 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. True False

44. If the unrelated business income of an exempt organization is
$20,000 or less, the unrelated business income tax (UBIT) will be $0. True False

45. For purposes of the unrelated business income tax, debt-financed
property is all property of the exempt organization that is held to
produce income and on which there is acquisition indebtedness. True False

46. Even though a church is exempt under § 501(c)(3), it is required to obtain IRS approval for its exempt status. True False

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