M8-Tax-Exempt Organizations Flashcards
An exempt organizations is not taxed on unrelated business income of less than $1,000. (true or false)
true
Unrelated business taxable income is the gross income from any unrelated trade or business “regularly” carried on, minus business deductions directly connected therewith. If expenses exceed income, a net operating loss occurs, which is subject to the carryback and carryover provisions of net operating losses.
The tax on unrelated business income is not imposed if the unrelated business activity is intermittent and is carried on once a year. Unrelated business taxable income must be derived from an activity that constitutes a trade or business that is regularly carried on and is not substantially related to the organization’s tax-exempt purpose.
An incorporated exempt organizations must comply with the code provisions regarding installment payments of estimated income tax by corporations. (true or false)
true
An incorporated exempt organization must make estimated tax payments if its tax can be reasonably expected to be $500 or more.
An incorporated exempt organization must pay at least 90% of the tax due as shown on the prior year’s return in quarterly estimated tax installments, with the balance due by the due date of the return.
The private foundation status of an exempt organization will terminate if it becomes a public (50% type) charity. Under Section 509 private foundations include all Code 501(C)(3) organizations, except:
- Max 50% charitable deduction donees
- Broadly publicly-supported organizations
- Supporting organizations
- Public safety organizations
To qualify as an exempt organization, an applicant must not be a private foundation organized and operated exclusively to influence legislation. (true or false)
true
The applicant must be of a type specifically identified as one of the classes upon which exemption is conferred by the code (e.g., organized for religion, charitable, scientific, etc., purposes)
An unrelated business does not include any activity where all the work is performed by the organization by unpaid volunteers. (true or false)
true
Receipt of unrelated business income in excess of certain limits does not affect the organization’s exempt status, but dos trigger a tax on income from excess holdings.
Unrelated business income relates to both the performance of services and the sale of goods that is not substantially related to the exercise or performance of the entity’s purpose or function.
To qualify as an exempt organization other than a church or an employee’s qualified pension or profit sharing trust, the applicant must file a written application with the internal revenue service. (true or false)
true
An unrelated business does not include any activity where all the work is performed for the organization by unpaid volunteers. Thus, using unpaid volunteers makes that business or activity “related”. (true or false)
true
Organizations qualify as tax-exempt if:
1) It is both organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes; for public safety testing; for the prevention of cruelty to children or animals; or to foster national or international amateur sports competition,
2) No part of its net earnings goes to any private shareholder or individual, and
3) No substantial part of its activities consists of carrying on propaganda or otherwise attempting to influence legislation (direct participation in a political campaign is prohibited)
An annual return that discloses substantial contributors and amounts contributed is required of most organizations exempt from income tax under Section 501, including private foundations. Exempt from this filing requirement are:
- Churches
- The exclusively religious activities of a religious order, and church, denomination, or interdenominational sponsored foreign mission societies, and
- Certain organizations that normally have annual gross receipts of $50,000 or less.
The organizational test to qualify a public service charitable entity as tax exempt requires the articles of organization to limit the purpose of the entity to the charitable purpose. (true or false)
true
Partnerships are not referred to in IRC Section 501(c)(3), which provides for corporations, community chests, funds, and foundations to be organizations eligible for exemption from federal income taxes. (true or false)
true
