Tax exempt

Question 1

What must a tax exempt organization file

Answer 1

990

Question 2

What is the 990

Answer 2

Its an informational return

Question 3

Who must file the 990 -

Answer 3

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

Question 4

What must you include on the form

Answer 4

• The name of the contributors
• The amounts contributed
• All distributions

No - names of members

Question 5

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

Answer 5

Any UBI is taxed at corporate rates

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

Question 6

What is included in UBI

Answer 6

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

Question 7

What is not included in UBI

Answer 7

• 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

Question 8

When will you lose your exempt status

Answer 8

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

Question 9

When is extra money not UBI

Answer 9

1) it is intermittent

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

Question 10

What is related income

Answer 10

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

Question 11

What is the organizational test to a tax exempt organization

Answer 11

• 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

Question 12

What two types of organizations qualify as tex exempt

Answer 12

a corporation or a trust

Question 13

Can a foreign corporation be tax exempt

Answer 13

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

Question 14

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

Answer 14

• 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

Question 15

Do churches need to file a return

Answer 15

No - separation of church and state

Question 16

Can a savings and loan association be exempt

Answer 16

No

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

Question 17

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

Answer 17

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.

Question 18

How do you get exempt status

Answer 18

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

Question 19

Can an exempt organization incorporate and issue capital stock

Answer 19

Yes - can be eater a corporation or a trust

Question 20

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

Answer 20

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

Question 21

What is the lodge system

Answer 21

This is an organization that operates through local branches

Question 22

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

Answer 22

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

Question 23

when will a tax preparer get a penalty

Answer 23

• 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

Question 24

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

Answer 24

• 3 years

Question 25

do you need to retain work papers

Answer 25

no

Question 26

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

Answer 26

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

Question 27

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

Answer 27

you have 150 days

Question 28

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

Answer 28

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

Question 29

How do you establish nexus with anoretic state

Answer 29

• 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

Question 30

Do these provide nexus:

sale of goods

hiring sales employee

purchasing raw materials

Answer 30

No not 1 does

but buying an office building would yes!

Question 31

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

Answer 31

more likely than not

Question 32

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

Answer 32

realistic possibility

Question 33

If you have a position the is 20%

Answer 33

reasonable basis

Question 34

What is nexus

Answer 34

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.

Question 35

When can you disclose information

Answer 35

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.

Question 36

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

Answer 36

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

Question 37

when you use the UDIPTA - what do you measure

Answer 37

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.

Question 38

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

Answer 38

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.

Question 39

What are the three sets of original jurisdiction courts

Answer 39

U.S. Tax Court,

the U.S. district courts,

and the U.S. Court of Federal Claims.

Question 40

What is apportionment

Answer 40

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