116099417. Page 1 of 3
First Name
Last Name:
Home work-Chapter 14-15. Enter your answers on the answer sheet posted on the web page.
Turn in one copy of your solutions at the start of class. (5 points per question.)
EXEMPTION
1. A Chamber of Commerce is an example of a:
a. 501(c)(3) organization
b. 501(c)(6) organization
c. 501(c)(7) organization
d. none of these
2. Which of these organizations is subject to a penalty tax for failure to distribute its income?
a. Public charity
b. Private Foundation
c. Feeder organization
d. none of these
3. Which of the following is true regarding exempt organizations?
a. IRS rulings issued to the organizations are not available for public inspection.
b. All exempt organizations file annual returns with the IRS
c. A charitable organization is required to file an application with the IRS to be recognized as an exempt
organization, except where the law provides that no application is required
d. An organization that operates on a nonprofit basis is automatically classified as an exempt
organization.
e. A business is exempt if all of its profits are required to be distributed to a charity such as UNCC.
4. Which one of these types of organizations qualifies as an organization exempt from income tax?
a. All "feeder" organizations, primarily conducting businesses for profit, but
distributing 100% of their profits to organizations exempt from taxation.
b. A private foundation organized to influence legislation pertaining to protection of the environment.
c. A business league operated primarily to publish a yearbook comprised of members' paid
advertisements, solicited by paid employees.
d. A labor union that represents employees of a particular industry in their negotiations with employers.
INTERMEDIATE SANCTIONS
5. Intermediate sanction may be applied by the IRS when
a. a disqualified person receives unreasonable compensation.
b. the organization acquires an unrelated business
c. a private foundation fails to distribute its income
d. All of these
PRIVATE FOUNDATIONS
6. (Sec. 508(b)) A private foundation is a special type of:
a. charity
b. civic league
c. business league
d.
social club
7. Which of the following § 501(c)(3) exempt organizations is appropriately classified as a private foundation?
a. Cincinnati Memorial Hospital.
b. University of Arizona.
Bill
and
Melinda
Gates
Foundation
c.
d. United Fund.
All
of
the
above.
e
116099417. Page 2 of 3
UNRELATED BUSINESS INCOME
8. Which of the following statements is correct regarding the unrelated business income of exempt organizations?
a. Unrelated business income relates to the performance of services, but not to the sale of goods.
b. An unrelated business does not include an activity where all the work is performed for the organization
by unpaid volunteers.
c. Unrelated business income tax will not be imposed if profits from the unrelated business are used to
support the exempt organization's charitable activities.
d. If an exempt organization has any unrelated business income, it will result in the loss of the
organization's exempt status.
9. For an exempt organization to be subject to the UBIT, which of the following circumstances must exist?
a. The exempt organization conducts a trade or business.
b. The trade or business is not substantially related to the exempt purpose of the organization.
c. The trade or business is regularly carried on by the exempt organization.
d. All of these must be present for the tax to apply.
FILING REQUIREMENTS
10. Which organization is required to file an annual information return using form 990? CPA-Nov-88
An exempt country club
a. A church
b.
All exempt organizations with gross receipts of $25,000 or more
c. A private foundation
d.
11. The filing of a return covering unrelated business income.
a. Is required of all exempt organizations having at least $1,000 of unrelated business
taxable income for the year.
b. Relieves the organization of having to file a separate annual information return.
c. Is not necessary if all of the organization's income is used exclusively for charitable purposes.
d. Must be accompanied by a minimum payment of 50% of the tax due as shown on the return, with the
balance of tax payable six months later.
116099417. Page 3 of 3
Multi State Income Tax - Chapter 15
12. (NC Dept of Revenue - Individual Return Instructions) Jan worked in NC during the first half of year and in SC during the last half of
year, but continued to live in NC throughout the year. Jan’s salary of $120,000 was earned evenly throughout the year.
Jan will report salary income of $60,000 on her North Carolina Individual Income Tax
a.
Return and salary of $60,000 on her South Carolina Individual Income Tax Return.
Jan will report salary income of $120,000 on her North Carolina Individual Income Tax Return and salary of $60,000
b.
on her South Carolina Individual Income Tax Return. After computing the income tax owed to South Carolina, she
will take a credit for that tax against her North Carolina Income tax.
Jan will report salary income of $60,000 on her North Carolina Individual Income Tax Return and salary of $60,000
c.
on her South Carolina Individual Income Tax Return. After computing the income tax owed to South Carolina, she
will take a deduction for that tax against her North Carolina Income tax.
13. Wailes Corporation is subject to a corporate income tax only in State X.
The starting point in computing X taxable income is Federal taxable income. Wailes’ Federal taxable income is $650,000, which includes a
$60,000 deduction for state income taxes. During the year, Wailes received $50,000 interest on Federal obligations. State X does not allow
a deduction for federal income tax payments. Wailes’ taxable income for X purposes is:
$600,000.
a.
b. $650,000.
c. $660,000.
d. $710,000.
14. In determining state taxable income, all of the following are adjustments to Federal income except:
Net operating loss.
a.
b. Federal income tax expense.
c.
Dividend income.
d.
Cost of goods sold.
e. State income tax refunds
15. Which of the following are common adjustments to federal taxable to get state taxable income?
b. adding back interest earned on municipal bonds
a. Adding back the deduction for state income taxes
c. Subtracting interest income earned on federal bonds
d. Adding or subtracting differences in different deprecation methods required at federal and state levels.
e. All of these
16. Dough Company sold an asset on the first day of the tax year for $100,000. Dough’s tax basis for the asset was $40,000. Because of
differences in cost recovery schedules, the state regular-tax basis in the asset was $60,000. What adjustment, if any, should be made to
Federal taxable income in determining the correct state taxable income for the typical state?
$0.
$20,000.
$45,000.
a.
b.
c.
d. ($20,000).
17. Big Corporation operates in two states. Its total taxable income amounts to $1,000,000.
State1
State 2
Total
Sales
$20,000,000 $30,000,000
$50,000,000
Property values
$25,000,000 $25,000,000
$50,000,000
Compensation
$3,000,000
$2,000,000
$5,000,000
How much taxable income is reported for state no. 2?
$1,000,000
$250,000
a.
b.
c.
$500,000
d.
$750,000
18. Repeat preceding question. Assume State no. 2 double weights Sales. How much taxable income is reported for state no. 2?
$525,000
$575,000
$500,000
a.
b.
c.
d. $750,000
19. Corporation operates in seven states. Its income amounts to $1,700,000. What is the UDITPA factor in State1 (closest)?
State1
Total
Sales
$6,000,000
$10,000,000
Property values
$22,000,000
$75,000,000
Compensation
$1,500,000
$4,500,000
34%
36%
a.
b.
c. 31%
d. 40%
20. A state UDITPA factor is 37%, taxable income to be apportioned is $440,000, and state income tax rate is 10%, what is the state
income tax?
$162,800
$44,000
a.
b.
c. $146,520
d. $16,280
e. Other
21. Premium Corp. has total taxable income of $1 million, and in State W has a sales factor of 60%, a payroll factor of 50%, and a
property factor of 46%. What is Premium's State W UDITPA apportionment factor and State W taxable income?
50 percent; $500,000 taxable income
b. 52 percent; $520,000 taxable income
a.