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Charitable Organizations Flashcards

7 cards from real IRS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. A 501(c)(3) organization that provides more than what percentage of its services to private interests risks losing its tax-exempt status due to private benefit?

    Answer: More than 5%

    Private benefit beyond an insubstantial amount (generally more than 5%) can jeopardize a 501(c)(3) organization's tax-exempt status.

  2. Which form must a charitable organization file to notify the IRS of its intent to operate as a 501(c)(4) social welfare organization?

    Answer: Form 1024-A

    Form 1024-A is used by organizations seeking recognition as a 501(c)(4) social welfare organization.

  3. Under the intermediate sanctions rules, who is considered a 'disqualified person' of a 501(c)(3) organization?

    Answer: Anyone in a position to exercise substantial influence over the organization

    A disqualified person is anyone who can exercise substantial influence over the organization's affairs, including founders, board members, and major donors.

  4. What is the excise tax rate imposed on excess benefit transactions on the disqualified person who received the benefit?

    Answer: 25%

    The initial excise tax on the disqualified person who received the excess benefit is 25% of the excess benefit amount.

  5. A charity receives a $500 donation and gives the donor a $75 dinner in return. What amount can the donor deduct?

    Answer: $425

    When a donor receives a benefit in exchange for a contribution, the deductible amount is only the excess of the contribution over the fair market value of the benefit received ($500 − $75 = $425).

  6. Which type of charitable organization is generally exempt from the requirement to file Form 990?

    Answer: Churches and certain church-affiliated organizations

    Churches, their integrated auxiliaries, and conventions or associations of churches are generally not required to file Form 990.

  7. A donor contributes appreciated stock (basis $10,000, FMV $40,000) held more than one year to a public charity. What is the maximum deduction assuming the donor meets the AGI limit?

    Answer: $40,000

    A donor contributing long-term capital gain property to a public charity may deduct the full fair market value, not the cost basis.