Tax exempt Flashcards by Kirsten Years

What must a tax exempt organization file

990

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What is the 990

Its an informational return

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Who must file the 990 -

a tax exempt other than a church with receipt of greater than 50K

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What must you include on the form

The name of the contributors
The amounts contributed
All distributions

No - names of members

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What is you have UBI and elect to be taxed as a corporation

Any UBI is taxed at corporate rates

It you elect trust - then you are taxed at trust rates

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What is included in UBI

this is any unrelated business income - not part of your main mission

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What is not included in UBI

Intermittent event - bake sale
Royalty iconen, Interest, and dividends
If bulk of merchandise is donated
If book of services are donated

Bingo, cafeteria, bookstore, carnival

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When will you lose your exempt status

A tax exempt organization that attempts to influence political legislation or support a specific candidate

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When is extra money not UBI

1) it is intermittent

2) not conducted with the competitive and promotional efforts typical of commercial endeavors

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What is related income

This is income that is directly associated with an organizations exempt purpose.

This income is NOT table as UBI

Examples - running a business to provide therapeutic employment

selling goods made by people as part if their rehabilitation

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What is the organizational test to a tax exempt organization

the articles of incorporation specifically must state that the the purpose of the organization is limited to the charitable purpose
they are limited to those that fit the classification of tax exempt by the IRS

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What two types of organizations qualify as tex exempt

a corporation or a trust

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Can a foreign corporation be tax exempt

Yes an exempt organization must be a corporation or trust, but doe NOT need to be incorporated in eh US

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What is the difference between a private foundation and a public foundation

Private foundation must receive less than 1/3 of its support from the general public - 2/3 from private - like foundations
A public charity receives more than 1/3 of its support from the general public

If a private gets more than 1/3 from public they violate their operating requirement of a private foundation - they will then lose their status as an exempt organization

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Do churches need to file a return

No - separation of church and state

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Can a savings and loan association be exempt

Yes - 
fraternities and country clubs
yes  - credit unions
yes - condo associations
-yes labor unions

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Will Unrelated business income tax not be imposed if profits from the unrelated business are used to support the exempt organization’s charitable activities.

he fact that income will be used to support an organization’s purpose does not exempt it from being considered UBI if the source of the income is unrelated to that purpose.

How do you get exempt status

You must file a written application that is approve by the IRS

Can an exempt organization incorporate and issue capital stock

Yes - can be eater a corporation or a trust

If you provide sick benefits to your members will you lose your tax exempt status

no - it does not prevent an organization from qualifying as exempt

What is the lodge system

This is an organization that operates through local branches

What is a foreign subsidiary and a foreign branch and what is the difference between them and tax implications

A foreign branch is part of a US entity. It therefore will pay US federal taxes.

It will also take the benefits such as using losses to offset income, use the foreign tax credit, and DRD

A foreign subsidiary is a separate company

It is NOT consolidated with its US parent - it therefore it doesn’t get the tax breaks available

when will a tax preparer get a penalty

if they do not sign a tax return as the preparer
don’t provide a copy of the tax return
don’t keep a copy of the tax return

How long do you need to retain the record of a tax return

3 years

do you need to retain work papers

How long do you have to respond after you received a notice of deficiency

you have 90 days to file a petition with the Tax Court

How long do you have if you are outside of the US

you have 150 days

When does disclosure of a tax return position reduce an accuracy related penalty

If the position does NOT involve a tax shelter, is NOT frivolous, has YES a reasonable basis, and is YES properly substantiated

How do you establish nexus with anoretic state

- a state can impose tax on a company that is doing business in there state- if they establish nexus nexus is created when your company gets income other than through sale of goods, have employees doing thing OTHER than solicitation, or has capital property

Do these provide nexus: sale of goods hiring sales employee purchasing raw materials

No not 1 does but buying an office building would yes!

If you have a position that is more than 50% - what is that called

more likely than not

If you have a position that is more than 1/2

realistic possibility

If you have a position the is 20%

reasonable basis

What is nexus

Nexus is a connection, such as a physical presence or other economic connection, between a company and a state that is sufficient for the state to tax the company.

When can you disclose information

information may be provided in order to enable a tax processor to compute the taxpayer’s liability, as a result of an administrative order by a state agency that registers tax return preparers, and for peer review.

What do you need in a tax shelter return to avoid a penalty

if you have reason to believe that the position would be >50% of more likely than not be upheld

when you use the UDIPTA - what do you measure

the Uniform Division of Income for Tax Purposes Act requires that business income be allocated among the states using a combination of ratios involving the value of real estate occupied, compensation to employees, and sales.

Rents and royalties from tangible personal property is generally taxed in the State in which the property is used.

Rents and royalties from tangible personal property are generally allocated to the state in which the property is used. When the company is not subject to income tax in the state in which the property is used, the income is then allocated to the state in which the company is domiciled.

What are the three sets of original jurisdiction courts

U.S. Tax Court, the U.S. district courts, and the U.S. Court of Federal Claims.

What is apportionment

Apportionment is the division of business income earned by an entity to avoid the taxation of the same income by multiple jurisdictions.