Need a brief discussion or reply for below discussion ..

As the financial manager for the museum, it is my responsibility to make sure all rules and guidelines are met. I have provided some information regarding the UBI and the UBIT so that you can get a clearer definition as to why I must follow the rules and regulations. The Unrelated Business Income is gross income from a trade or business regularly carried on by a tax-exempt organization less directly connected expenses, certain net operating losses, and qualified charitable contributions that is not related to its exempt purpose. If more than $1000, the income is subject to federal income tax at corporate tax rates, (Reck, Lowensohn, & Neely, 2022). All activities that generate UBIT are considered Unrelated Business Income and the income generated taxable if they meet the criteria as defined by the IRS Section 501 (c) (3). The UBIT requirements apply to all not-for-profit organizations, public colleges and universities except federal corporations and certain charitable trusts.

Requirements:

It is a trade or business that produces income from selling goods or performing services.

It is regularly carried on in a way that's like the commercial activities of nonexempt organizations.

It is not substantially related to furthering the exempt purpose of the organization. Activities that generate income must play a major role in achieving an organization's tax-exempt purpose to be substantially related, (Kagan, 2023).

For the subject under discussion, the sales from gift shop of the museum satisfies all the three criteria. Most importantly the sales are an income from a business activity and are also regular in nature as evident from previous years records. The gift shop does not further the cause of museum being an exempt institution. As such the activity of sale from gift shop of a museum should be classified as unrelated business activity and unrelated business income tax should be levied.