CAP Taxation & Legal Compliance 2

Question 1

Which type of income earned by a tax-exempt organization is subject to Unrelated Business Income Tax (UBIT)?

Accepted Answer

Income from a trade or business regularly carried on that is not substantially related to the exempt purpose

Answer

Investment income from a permanent endowment

Answer

Passive rental income from real property without debt financing

Answer

Dividends from a minority stock holding in a public company

Question 2

Under IRC 170(e)(1), which type of contribution requires a donor to reduce the deduction by the amount of ordinary income that would have been recognized if the property were sold?

Accepted Answer

Short-term capital gain property and ordinary income property

Answer

Long-term appreciated publicly traded stock

Answer

Real estate held more than one year

Answer

Cash contributions to donor-advised funds

Question 3

A private foundation that fails to distribute at least 5% of its non-charitable use assets annually is subject to which excise tax under IRC 4942?

Accepted Answer

30% of undistributed income

Answer

1.39% of undistributed income

Answer

10% of undistributed income

Answer

Revocation of tax-exempt status

Question 4

Which of the following correctly describes the tax treatment of a quid pro quo contribution to a charity?

Accepted Answer

Only the amount exceeding the fair market value of goods or services received is deductible

Answer

The full amount paid is deductible as a charitable contribution

Answer

Quid pro quo contributions are never tax-deductible

Answer

The IRS requires a separate appraisal for all quid pro quo gifts

Question 5

For estate planning purposes, what is the primary tax advantage of making a charitable bequest from a traditional IRA rather than from taxable estate assets?

Accepted Answer

The IRA bequest avoids income in respect of a decedent, eliminating both income tax and estate tax on those funds

Answer

The bequest qualifies for a stepped-up cost basis

Answer

The charity receives a larger gift because IRAs grow tax-free

Answer

Bequests from IRAs qualify for an additional estate tax charitable deduction

Question 6

A nonprofit that engages in private benefit transactions for the benefit of a non-charitable class risks which IRS consequence?

Accepted Answer

Revocation of tax-exempt status under IRC 501(c)(3)

Answer

Imposition of UBIT on all future investment income

Answer

Reclassification as a private foundation

Answer

Required distribution of all assets to government