Ch 23

Question 1

Debt-financed income

Answer 1

Included in computations of the unrelated business income of an exempt organization, the gross income generated from debt-financed property.

Question 2

Excess lobbying expenditure

Answer 2

An excise tax is applied on otherwise tax-exempt organizations with respect to the excess of total lobbying expenditures over grass roots expenditures for the year.

Question 3

Exempt organization

Answer 3

An organization that is either partially or completely exempt from Federal income taxation. ? 501.

Question 4

Feeder organization

Answer 4

An entity that carries on a trade or business for the benefit of an exempt organization. However, such a relationship does not result in the feeder organization itself being tax-exempt. ? 502.

Question 5

Grass roots expenditure

Answer 5

Exempt organizations are prohibited from engaging in political activities, but spending incurred to influence the opinions of the general public relative to specific legislation is permitted by the law. See also excess lobbying expenditure.

Question 6

Intermediate sanctions

Answer 6

The IRS can assess excise taxes on disqualified persons and organization management associated with so-called public charities engaging in excess benefit transactions. An excess benefit transaction is one in which a disqualified person engages in a non-fair market value transaction with the exempt organization or receives unreasonable compensation. Prior to the idea of intermediate sanctions, the only option available to the IRS was to revoke the organization’s exempt status.

Question 7

Lobbying expenditure

Answer 7

An expenditure made for the purpose of influencing legislation. Such payments can result in the loss of the exempt status and the imposition of Federal income tax on an exempt organization.

Question 8

Private foundation

Answer 8

An exempt organization subject to additional statutory restrictions on its activities and on contributions made to it. Excise taxes may be levied on certain prohibited transactions, and the Code places more stringent restrictions on the deductibility of contributions to private foundations. ? 509.

Question 9

Unrelated business income (UBI)

Answer 9

Income recognized by an exempt organization that is generated from activities not related to the exempt purpose of the entity. For instance, the gift shop located in a hospital may generate unrelated business income. ? 511.

Question 10

Unrelated business income tax (UBIT).

Answer 10

Levied on the unrelated business income of an exempt organization.