STEP Charitable Planning & Philanthropy 3

Question 1

Following the Taxpayer Certainty and Disaster Tax Relief Act of 2019, what flat excise tax rate applies to the net investment income of most private foundations?

Accepted Answer

1.39%

Answer

1%

Answer

2%

Answer

5%

Question 2

A Private Operating Foundation differs from a standard private nonoperating foundation primarily because it:

Accepted Answer

Directly conducts its own active charitable programs rather than primarily making grants to other organizations

Answer

Must distribute all investment income to public charities within 12 months

Answer

Is subject to a 10% excise tax on net investment income

Answer

Is prohibited from holding more than 2% of any business enterprise

Question 3

In designing a 'zeroed-out' Charitable Lead Annuity Trust (CLAT) for wealth transfer planning, what is the primary objective?

Accepted Answer

Set the annuity rate so the IRS Section 7520 rate causes the present value of the remainder to equal zero, eliminating taxable gift value

Answer

Maximize the grantor's lifetime income while avoiding all estate taxes

Answer

Generate an income tax deduction equal to 100% of the assets contributed to the trust

Answer

Transfer assets to charity with no requirement to pay gift or estate taxes on the contributed amount

Question 4

When a donor makes a noncash charitable contribution with a claimed value exceeding $500, the donor is generally required to:

Accepted Answer

Attach a completed IRS Form 8283 (Noncash Charitable Contributions) to their federal income tax return

Answer

Obtain only a contemporaneous written acknowledgment from the charity

Answer

Obtain a qualified appraisal regardless of the type or value of the property

Answer

Receive advance IRS approval before claiming the deduction

Question 5

When appreciated property is sold in a bargain sale to a charity, how is the donor's taxable gain calculated?

Accepted Answer

Gain is calculated only on the sale portion, using a basis allocated proportionally between the sale proceeds and the charitable contribution portion

Answer

No gain is recognized because the transaction benefits a tax-exempt charity

Answer

The entire fair market value of the property is treated as a charitable contribution with no gain recognition

Answer

Gain is deferred until the charity subsequently disposes of the property

Question 6

Under the excess business holdings rules of IRC Section 4943, what is the combined ownership limit for a private foundation and all its disqualified persons in any one business enterprise?

Accepted Answer

20% of voting stock

Answer

35% of voting stock

Answer

10% of voting stock

Answer

No ownership is permitted in any for-profit business

Question 7

Which characteristic best distinguishes a community foundation from other types of charitable organizations?

Accepted Answer

It manages a collection of separately named charitable funds contributed by multiple donors to benefit a defined geographic community, qualifying as a public charity

Answer

It is governed exclusively by a board appointed by local government officials

Answer

It primarily supports international humanitarian causes

Answer

It must distribute 100% of contributed assets to operating charities within the same fiscal year