Question 1. A church is one of the types of exempt organizations.

1. A church is one of the types of exempt organizations.

a. True

b. 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.

a. True

b. False

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

a. True

b. False

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

a. True

b. False

5. To satisfy the “not for profit” requirement for exempt status, the entity may notbe engaged in a trade or business.

a. True

b. False

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

a. True

b. False

7. Engaging in a prohibited transaction can result in an exempt organization being subject to Federal income tax, but

cannotcause it to lose its exempt status unless the exempt organization repeats the prohibited transaction.

a. True

b. False

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

a. True

b. 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.

a. True

b. False

10.Certain § 501(c)(3) exempt organizations are permitted to engage in lobbying activities in the same manner as

taxable organizations.

a. True

b. False

11.Certain § 501(c)(3) exempt organizations are permitted to engage in lobbying activities on a limited basis. An

example of such an exempt organization is a church.

a. True

b. False

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

a. True

b. False

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

a. True

b. 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.

a. True

b. 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%).

a. True

b. 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.

a. True

b. 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.

a. True

b. False

18.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).

a. True

b. False