tax problems – questin and answer ,.,. ch 23

1. LO.1, 6 Eggshell, Inc., a C corporation, operates a rental clothing store, and its profits are subject to double taxation. First Church of the States operates a retail gift shop and bookshop and is not subject to taxation. What is the explanation for this difference in Federal income tax treatment?2. LO.1 Why are certain organizations either partially or completely exempt from Federal income tax?3. LO.1 Which of the following organizations qualify for exempt status?a. Tulane University (a private university).b. Virginia Qualified Tuition Program.c. Red Cross.d. Disneyland.e. Ford Foundation.f. Houston Chamber of Commerce.g. Colonial Williamsburg Foundation.h. Professional Golfers Association (PGA) Tour.i. Pittsburgh Steelers.j. Cleveland Indians.k. Louisiana State University (a public university).4. LO.1 Identify the statutory authority under which each of the following is exempt fromFederal income tax.a. Kingsmill Country Club.b. Shady Lawn Cemetery.c. Peach Credit Union.d. Veterans of Foreign Wars.e. Boy Scouts of America.f. United Fund.g. Federal Deposit Insurance Corporation.h. Bruton Parish Episcopal Church.i. PTA.j. National Press Club.k. Brown University (a private university).5. LO.2 What are the common characteristics shared by many exempt organizations?6. LO.3 Leonard contributes $4,000 to an exempt organization. Addie contributes $4,000 to a different exempt organization. Why might Addie be permitted a $4,000 charitable contribution deduction in calculating her itemized deductions whenLeonard is not?7. LO.3 Good, Inc., a § 501(c)(3) exempt organization, engages in a § 503 prohibited transaction. What negative tax consequences may be associated with Good engaging in a § 503 prohibited transaction?8. LO.3 Can a church make an election that will enable it to engage in lobbying on a limited basis without incurring any negative tax consequences? Explain.9. LO.3 Under what circumstances can an exempt organization engage in lobbying activities?What types of exempt organizations are eligible for this treatment?10. LO.3 The IRS can impose intermediate sanctions on a public charity if its gross unrelated business income exceeds 50% of its gross income or if less than two-thirds of its net unrelated business income is used in carrying out its tax-exempt mission. Evaluate this statement.11. LO.3 The Living Museum is a tax-exempt organization. Dolphin Corporation, a wholly owned subsidiary of the Living Museum, sells boats. Dolphin remits all of its earnings each year to its parent. Is Dolphin exempt from Federal income tax because it is a subsidiary of a tax-exempt organization and remits all of its earnings to a tax-exempt organization?Explain.12. LO.3 What types of activities are not subject to the tax imposed on feeder organizations?13. LO.4, 5 What is a private foundation? What are the disadvantages of an exempt organization being classified as a private foundation?14. LO.4 Which of the following exempt organizations could be private foundations?a. Bruton Parish Episcopal Church.b. Our Lady Catholic Church.c. Port Allen Community Hospital.d. National Football League (NFL).e. Southeastern Louisiana University Alumni Association.f. United Fund.g. Lee’s Foundation.h. Rice University (a private university).15. LO.4 Describe the external support test and the internal support test for a private foundation.

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