1. Happy House, Inc., an exempt organization, records $340,000 of gross unrelated business income (UBI) in its first year of operations. The following expenses were incurred in producing the UBI.
Expense Amount
Cost of goods sold...............................$100,000
Depreciation..........................................18,000
Repairs and Maintenance............................4,000
Miscellaneous..........................................2,000
Happy House qualifies for the standard annual deduction and has documented plans for reinvesting 100% of net proceeds from UBI back into its exempt activities. The applicable corporate tax rate is 34%. Considering only the above facts, what is Happy House's unrelated business income tax (UBIT) liability for the year?
a. $79,220
b. $73,440
c. $73,100
d. $0
2. The International Association of Accountants (IAA), a labor union, made a one-time donation to a political candidate who is also a member of the organization. In addition, the IAA publicly endorsed the member-candidate through flyers mailed to its membership. Which of the following is true about the IAA exempt status?
a. The IAA is entitled to exempt status because IRC § 501(c) specifically allows labor unions to be exempt.
b. The IAA is entitled to exempt status because the candidate it supported is a member of the union.
c. The IAA is entitled to exempt status because it only made a one-time donation, which is not considered actual influence.
d. The IAA will be denied exempt status because it supported a specific political candidate.
3. Which of the following exempt organizations are required to file an annual information return if gross receipts exceed $50,000 in a year?
I. A charity
II. A labor union
III. A church
a. I, II, and III
b. I and II
c. I only
d. II only
4. What is the due date for an exempt organization's annual information return?
a. The 15th day of the fifth month after the organization's year-end.
b. The 15th day of the fourth month after the organization's year-end.
c. The 15th day of the third month after the organization's year-end.
d. The 15th day of the second month after the organization's year-end.