R3 M7 - Tax- Exempt Organization Overview Flashcards
(7 cards)
Income from which of the following sources is taxable income to the political organization?
A. Investments B. Fundraising events C. Membership dues D. Contributions
Choice “A” is correct. Investment income of a political organization is not exempt function income and is subject to tax.
Choice “B” is incorrect. Income from fundraising events that is set aside or spent for the exempt function of the political organization is tax-exempt.
Choice “C” is incorrect. Income from membership dues that is set aside or spent for the exempt function of the political organization is tax-exempt.
Choice “D” is incorrect. Income from contributions that is set aside or spent for the exempt function of the political organization is tax-exempt.
Which of the following special provisions need not be included in a private foundation’s governing instrument for it to qualify as a tax-exempt organization under Section 501(c)(3)?
A. The foundation will distribute income for each year as required under the tax law. B. The foundation will not engage in any act of self-dealing. C. The foundation will not retain any excess business holdings. D. The foundation will only accept contributions from individuals.
Choice “D” is correct. There is no requirement that the private foundation only accept contributions from individuals. Private foundations typically receive funding from a single major source, rather than many sources, but the source may be individuals, such as a family, or a corporation.
Choice “A” is incorrect. A private foundation’s governing instrument must include a special provision that the foundation will distribute income for each year as required under the tax law, at a time and in a manner so as not to be subject to tax on undistributed business income.
Choice “B” is incorrect. A private foundation’s governing instrument must include a special provision that the foundation will not engage in any act of self-dealing.
Choice “C” is incorrect. A private foundation’s governing instrument must include a special provision that the foundation will not retain any excess business holdings.
Income from which of the following sources is taxable income to the political organization?
A. Investments B. Fundraising events C. Membership dues D. Contributions
Choice “A” is correct. Investment income of a political organization is not exempt function income and is subject to tax.
Choice “B” is incorrect. Income from fundraising events that is set aside or spent for the exempt function of the political organization is tax-exempt.
Choice “C” is incorrect. Income from membership dues that is set aside or spent for the exempt function of the political organization is tax-exempt.
Choice “D” is incorrect. Income from contributions that is set aside or spent for the exempt function of the political organization is tax-exempt.
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