CAP Documentation & Reporting 3

Question 1

Which section of Form 990 requires a public charity to disclose its three highest-compensated independent contractors?

Accepted Answer

Part VII Section B

Answer

Form 990 Part VII Section B requires disclosure of the five highest-compensated independent contractors paid more than $100,000, providing transparency about significant outside relationships.

Question 2

A private operating foundation must annually demonstrate active conduct of its exempt programs. Which test satisfies this requirement?

Accepted Answer

The income test and at least one of the assets, endowment, or support tests

Answer

A private operating foundation must pass the income test (spending substantially all income on exempt programs) plus at least one of the assets, endowment, or support tests each year.

Question 3

What is the purpose of IRS Form 5227 filed by a charitable remainder trust?

Accepted Answer

To report distributions to beneficiaries and trust assets annually

Answer

Form 5227 is the Split-Interest Trust Information Return, filed annually by charitable remainder trusts to report trust assets, income, distributions to income beneficiaries, and the charitable remainder interest.

Question 4

When a private foundation makes a grant to a foreign organization, what due diligence documentation standard applies?

Accepted Answer

The foundation must conduct equivalency determination or expenditure responsibility

Answer

To make grants to foreign organizations, private foundations must either obtain an equivalency determination (treating the foreign org as equivalent to a U.S. public charity) or exercise expenditure responsibility with detailed reporting.

Question 5

Under the Pension Protection Act of 2006, donor-advised funds are required to disclose which information on Form 990?

Accepted Answer

Total number of donor-advised accounts, aggregate contributions, grants, and year-end value

Answer

Schedule D of Form 990 requires DAF sponsors to report the total number of accounts, aggregate value of contributions, grants made, and total year-end fair market value across all DAF accounts.

(CAP) Certified Philanthropic Advisor Practice Test

(CAP) Certified Philanthropic Advisor Practice Test

CAP Documentation & Reporting 3