CNE Nonprofit Tax & Legal Requirements 3

Question 1

A nonprofit runs a thrift store where all net proceeds support its homeless shelter programs. The thrift store income is most likely:

Accepted Answer

Related business income exempt from tax

Answer

A thrift store operated primarily by volunteers where substantially all work is performed without compensation is exempt from UBIT under a specific IRS exception.

Question 2

When must a nonprofit provide a written acknowledgment to a donor for a cash contribution?

Accepted Answer

For contributions of $250 or more

Answer

Donors must receive a contemporaneous written acknowledgment from the charity for any single cash contribution of $250 or more to claim a tax deduction.

Question 3

A private foundation that fails to distribute at least 5% of its net investment assets annually faces:

Accepted Answer

An excise tax on the undistributed amount

Answer

Private foundations must distribute at least 5% of their net investment assets annually for charitable purposes; failure results in a 30% excise tax on the shortfall.

Question 4

What is a 'conflict of interest policy' primarily designed to protect in a nonprofit?

Accepted Answer

The organization's interests when board members have personal financial stakes in decisions

Answer

A conflict of interest policy requires board members and officers to disclose personal interests that could conflict with the nonprofit's best interests and recuse themselves from related decisions.

Question 5

Under the quid pro quo contribution rules, a nonprofit must provide a written disclosure when a donor pays more than:

Accepted Answer

$75 and the goods or services provided are worth less than the payment

Answer

A nonprofit must provide a written disclosure for quid pro quo contributions exceeding $75, stating the deductible portion (excess of payment over fair market value of goods/services received).

(CNE) Certified Nonprofit Executive Practice Test

(CNE) Certified Nonprofit Executive Practice Test

CNE Nonprofit Tax & Legal Requirements 3