IRS Charitable Organizations 2

Question 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?

Accepted Answer

More than 5%

Answer

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

Question 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?

Accepted Answer

Form 1024-A

Answer

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

Question 3

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

Accepted Answer

Anyone in a position to exercise substantial influence over the organization

Answer

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

Question 4

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

Accepted Answer

25%

Answer

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

Question 5

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

Accepted Answer

$425

Answer

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).

(IRS) Internal Revenue Service Certified Practice Test

(IRS) Internal Revenue Service Certified Practice Test

IRS Charitable Organizations 2