Tax-Exempt Organization Accounting Flashcards

A tax-exempt hospital operates a gift shop open to the general public. The gift shop revenue is most likely:

Answer: Unrelated business income subject to UBIT

A gift shop open to the general public is a trade or business regularly carried on that is not substantially related to the organization's exempt purpose, making it subject to UBIT.

Under ASC 958-310, how should a nonprofit hospital report conditional promises to give (conditional pledges)?

Answer: Not recognized until the condition is substantially met

Conditional promises to give are not recognized as revenue or assets until the conditions on which they depend are substantially met.

Which type of net assets classification would apply to a donation received by a hospital restricted by the donor for purchasing new MRI equipment?

Answer: Net assets with donor restrictions — purpose restriction

A donor-imposed restriction limiting use to a specific purpose (MRI equipment) results in net assets with donor restrictions — a purpose restriction.

A nonprofit hospital receives a federal grant requiring the funds be used only for pandemic preparedness. This grant is classified as:

Answer: An exchange transaction recognized ratably over the grant period

Government grants with performance conditions are generally classified as exchange transactions under ASC 958-605, recognized as the performance obligations are met.

A 501(c)(3) hospital's executive compensation is reviewed by the IRS using the 'rebuttable presumption of reasonableness.' This presumption is established when:

Answer: An independent body approves compensation based on comparable data and documents the decision

The rebuttable presumption of reasonableness under IRC Section 4958 requires approval by an independent authorized body, reliance on comparable data, and adequate documentation of the decision.

An endowment fund at a healthcare nonprofit has accumulated gains of $500,000 beyond the original gift amount. Under UPMIFA, these gains are:

Answer: Available for appropriation for the organization's programs if prudently managed

Under UPMIFA (Uniform Prudent Management of Institutional Funds Act), accumulated endowment gains are available for appropriation based on prudent spending rate decisions by the governing board.

Which statement is true regarding the filing threshold for Form 990-N (e-Postcard) versus Form 990-EZ for small tax-exempt healthcare organizations?

Answer: Organizations with gross receipts ≤ $50,000 may file Form 990-N

Tax-exempt organizations with gross receipts normally $50,000 or less may satisfy their annual filing requirement with the simple Form 990-N e-Postcard.