Question1630. TF #1 All bona-fide churches generally are exempt from Federal income tax.

01 May Question1630. TF #1 All bona-fide churches generally are exempt from Federal income tax.

Question
1630. TF #1
All bona-fide churches generally are exempt from Federal income tax.

a. True
b. False

1631. TF #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

1632. TF #3
Qualified state tuition programs are exempt from Federal income tax under § 501(c)(3).

a. True
b. False

1633. TF #4
An exempt entity in no circumstance is subject to Federal income tax.

a. True
b. False

1634. TF #5
An organization that is a for-profit entity can partially qualify for exempt status.

a. True
b. False

1635. TF #6
If an organization qualifies for exempt status for Federal income tax purposes, it is exempt from all Federal income taxes.

a. True
b. False

1636. TF #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.

a. True
b. False

1637. TF #8
The League of Women Voters is a § 501(c)(3) organization.

a. True
b. False

1638. TF #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

1639. TF #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.

a. True
b. False

1640. TF #11
A § 501(c)(5) labor organization is prohibited from lobbying for or against the passage of legislation.

a. True
b. False

1641. TF #12
An intermediate sanction imposed by the IRS on an exempt organization is a lesser sanction than revocation of exempt status.

a. True
b. False

1642. TF #13
If an exempt organization owns a feeder organization, the exempt organization is not taxed on the profits of the feeder organization under the unrelated business income tax (UBIT) rules.

a. True
b. False

1643. TF #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

1644. TF #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

1645. TF #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.

a. True
b. False

1646. TF #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

1647. TF #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.

a. True
b. False

1648. TF #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.

a. True
b. False

1649. TF #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 also are imposed on exempt organizations classified as public charities.

a. True
b. False

1650. TF #21
The excise tax imposed on a private foundation’s excess business holdings is in effect an audit fee to defray IRS expenses.

a. True
b. False

1651. TF #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.

a. True
b. False

1652. TF #23
The excise tax imposed on a private foundation’s investment income can be imposed both as an initial (first-level) tax and an additional (second-level) tax.

a. True
b. False

1653. TF #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.

a. True
b. False

1654. TF #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.

a. True
b. False

1655. TF #26
The unrelated business income tax (UBIT) is designed to treat the entity as if it were subject to the corporate income tax on its unrelated business taxable income, with the highest corporate tax rate (35%) applying.

a. True
b. False

1656. TF #27
Federal agencies exempt from Federal income tax under § 501(c)(1) are not subject to the unrelated business income tax (UBIT).

a. True
b. False

1657. TF #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.

a. True
b. False

1658. TF #29
An activity is not an unrelated trade or business for purposes of the unrelated business income tax (UBIT) unless it is profitable.

a. True
b. False

1659. TF #30
A profit-related activity of an exempt organization avoids the unrelated business income tax if greater than 75% of the merchandise sold had been received as a contribution.

a. True
b. False

1660. TF #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).

a. True
b. False

1661. TF #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.

a. True
b. False

1662. TF #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).

a. True
b. False

1663. TF #34
The income from a bingo game conducted by an exempt organization may be unrelated business income.

a. True
b. False

1664. TF #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.

a. True
b. False

1665. TF #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).

a. True
b. False

1666. TF #37
Revenue generated by an exempt organization from the distribution of low-cost items is not income from an unrelated trade or business.

a. True
b. False

1667. TF #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.

a. True
b. False

1668. TF #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).

a. True
b. False

1669. TF #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.

a. True
b. False

1670. TF #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.

a. True
b. False

1671. TF #42
Personal property rental income is subject to and real property rental income is not subject to the unrelated business income tax.

a. True
b. False

1672. TF #43
If personal property is leased with real property and more than 80% of the rent income under the lease is from personal property, all of the rent income is subject to the unrelated business income tax.

a. True
b. False

1673. TF #44
If the unrelated business income of an exempt organization is $25,000 or less, the unrelated business income tax (UBIT) will be $0.

a. True
b. False

1674. TF #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.

a. True
b. False

1675. TF #46
A church is required to obtain IRS approval for its exempt status if its annual gross receipts exceed $25,000.

a. True
b. False

1676. TF #47
Even though a church is not required to obtain IRS approval of its exempt status, it still must file Form 990 (Return of Organization Exempt from Income Tax) annually.

a. True
b. False

1677. TF #48
The due date for both Form 990 (Return of Organization Exempt from Income Tax) and Form 990-PF (Return of Private Foundation) is the fifteenth day of the fifth month after the end of the taxable year.

a. True
b. False

1678. TF #49
All exempt organizations which are subject to the unrelated business income tax must file Form 990-T (Exempt Organization Business Income Tax Return).

a. True
b. False

1679. TF #50
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)].