Question 1

Your client is a nongovernmental not-for-profit museum that operates a gift shop.Explain the unrelated business income tax to your client and suggest ways to avoid this tax.

Accepted Answer

The unrelated business income tax (UBIT)...

Question 2

Explain why Congress enacted the "intermediate sanctions" legislation in 1996.

Accepted Answer

Prior to 1996,the only sanction that the...

Question 3

All of the following are reasons why the Internal Revenue Service (IRS) overhauled the Form 990 for tax years beginning in 2008 except

Accepted Answer

A)  To minimize the burden of filing on tax-exempt organizations.
B)  To shorten the time it takes to complete a return for large not-for-profit organizations.
C)  To enhance transparency about the organization.
D)  To allow the IRS to efficiently assess noncompliance.

Question 4

Board members of a not-for-profit organization have a fiduciary responsibility to provide fiscal guidance and ongoing governance over the not-for-profit organization to ensure that its exempt mission is carried out as described in the incorporating documents and exempt application.

Accepted Answer

A) True 
 B)False

Question 5

All of the following are examples of acts or policies that are uniform across the United Stated for not-for-profit organizations except

Accepted Answer

A)  Uniform Prudent Management of Investment Funds Act of 2006.
B)  Model Charitable Solicitation Act.
C)  Uniform Executive Compensation Act.
D)  Volunteer Protection Act of 1997.

Question 6

A good measure of whether a not-for-profit organization is efficient in its fund-raising efforts is

Accepted Answer

A)  Public support as a percentage of fund-raising expenses.
B)  Current ratio.
C)  Total revenues divided by total expenses.
D)  Percentage of total expenses spent on the program function as opposed to support function.

Question 7

The purpose of the Internal Revenue Service's 2008 revision of the Form 990 is to simplify and shorten the form so that it takes less time for not-for-profit organizations to complete.

Accepted Answer

A) True 
 B)False

Question 8

The incorporating documents that have an external focus and describe the purpose of the organization without being too restrictive are called

Accepted Answer

A)  By-laws.
B)  IRS Form 990.
C)  Articles of incorporation.
D)  Minutes of the board meetings.

Question 9

A good measure of whether a not-for-profit organization is spending too much on overhead,such as general and administrative expenses,is

Accepted Answer

A)  Percentage of unrestricted net assets to operating expenses.
B)  Current ratio.
C)  Total revenues divided by total expenses.
D)  Percentage of total expenses spent on the program function as opposed to supporting the programs.

Question 10

One of the limitations of financial ratio analysis for not-for-profit organizations is that donors may incorrectly assume that there are federal or state laws that govern the percentage of annual revenues that a charity must spend on its programs.

Accepted Answer

A) True 
 B)False

Question 11

A state has the obligation to monitor and regulate a not-for-profit (NPO)organization because it granted the NPO tax-exempt status through the not-for-profit corporation laws.

Accepted Answer

A) True 
 B)False

Question 12

Performance measures that can be used to evaluate not-for-profit organizations include percentage of total expenses spent on the programs versus on supporting the programs and total dollars raised for fund-raising dollars spent.

Accepted Answer

A) True 
 B)False  True

Question 13

Intermediate sanctions are often imposed by the Internal Revenue Service,in addition to revoking the tax-exempt status for organizations that confer excessive economic benefits on persons with substantial influence over the organization.

Accepted Answer

A) True 
 B)False

Question 14

A good measure of whether a not-for-profit organization is a "going concern" and can sustain its operations into the future is

Accepted Answer

A)  Total revenues divided by assets.
B)  Percentage of unrestricted net assets to operating expenses.
C)  Percentage of total expenses spent on the program function as opposed to support function.
D)  Public support divided by total fund-raising expenses. B

Question 15

Not-for-profit organizations are so diverse in nature that it is not feasible to find benchmarks with which to compare their financial and operating performance.

Accepted Answer

A) True 
 B)False

Question 16

The income most likely to be considered unrelated business income of a human service organization that provides immunizations to children in the community is

Accepted Answer

A)  Rental of extra space in the building.
B)  Regular sale of sweatshirts with the organization's logo on it at a price considerably above cost.
C)  Interest and dividend income on investments.
D)  Gain on the sale of equipment no longer needed by the organization.

Question 17

Tax-exempt organizations must complete a Form 990 and send it to the Internal Revenue Service

Accepted Answer

A)  Only if they have unrelated business income.
B)  If they are nongovernmental and not a church.
C)  Whether they are governmental or nongovernmental.
D)  Only if they are a private foundation,not a public charity.

Question 18

The not-for-profit organization applying for tax-exempt status determines the appropriate subsection under IRC Sec.501 for which it wants to be considered and the Internal Revenue Service then approves or does not approve the application.

Accepted Answer

A) True 
 B)False  True

Question 19

Which of the following is a reason why an NPO might fail to qualify for tax-exempt status?

Accepted Answer

A)  It is operated primarily for the benefit of its members.
B)  Its officers are paid excessive wages.
C)  Its primary purpose is to promote the passage of legislation favorable to institutions of higher education.
D)  It has unrelated business income.

Question 20

Many states have worked closely to have uniform policies relating to not-for-profit organizations in the areas of not-for-profit incorporation,charitable solicitation,investing funds,and protecting volunteers.

Accepted Answer

A) True 
 B)False

Exam 15: Accounting for Colleges and Universities

Your client is a nongovernmental not-for-profit museum that operates a gift shop.Explain the unrelated business income tax to your client and suggest ways to avoid this tax.

Correct AnswerverifiedThe unrelated business income tax (UBIT)...View AnswerShow Answer

Explain why Congress enacted the "intermediate sanctions" legislation in 1996.

Correct AnswerverifiedPrior to 1996,the only sanction that the...View AnswerShow Answer

All of the following are reasons why the Internal Revenue Service (IRS) overhauled the Form 990 for tax years beginning in 2008 except

Correct AnswerverifiedShow Answer

Board members of a not-for-profit organization have a fiduciary responsibility to provide fiscal guidance and ongoing governance over the not-for-profit organization to ensure that its exempt mission is carried out as described in the incorporating documents and exempt application.

Correct AnswerverifiedShow Answer

All of the following are examples of acts or policies that are uniform across the United Stated for not-for-profit organizations except

Correct AnswerverifiedShow Answer

A good measure of whether a not-for-profit organization is efficient in its fund-raising efforts is

Correct AnswerverifiedShow Answer

The purpose of the Internal Revenue Service's 2008 revision of the Form 990 is to simplify and shorten the form so that it takes less time for not-for-profit organizations to complete.

Correct AnswerverifiedShow Answer

The incorporating documents that have an external focus and describe the purpose of the organization without being too restrictive are called

Correct AnswerverifiedShow Answer

A good measure of whether a not-for-profit organization is spending too much on overhead,such as general and administrative expenses,is

Correct AnswerverifiedShow Answer

One of the limitations of financial ratio analysis for not-for-profit organizations is that donors may incorrectly assume that there are federal or state laws that govern the percentage of annual revenues that a charity must spend on its programs.

Correct AnswerverifiedShow Answer

A state has the obligation to monitor and regulate a not-for-profit (NPO)organization because it granted the NPO tax-exempt status through the not-for-profit corporation laws.

Correct AnswerverifiedShow Answer

Performance measures that can be used to evaluate not-for-profit organizations include percentage of total expenses spent on the programs versus on supporting the programs and total dollars raised for fund-raising dollars spent.

Correct AnswerverifiedTrue

Intermediate sanctions are often imposed by the Internal Revenue Service,in addition to revoking the tax-exempt status for organizations that confer excessive economic benefits on persons with substantial influence over the organization.

Correct AnswerverifiedShow Answer

A good measure of whether a not-for-profit organization is a "going concern" and can sustain its operations into the future is

Correct AnswerverifiedB

Not-for-profit organizations are so diverse in nature that it is not feasible to find benchmarks with which to compare their financial and operating performance.

Correct AnswerverifiedShow Answer

The income most likely to be considered unrelated business income of a human service organization that provides immunizations to children in the community is

Correct AnswerverifiedShow Answer

Tax-exempt organizations must complete a Form 990 and send it to the Internal Revenue Service

Correct AnswerverifiedShow Answer

The not-for-profit organization applying for tax-exempt status determines the appropriate subsection under IRC Sec.501 for which it wants to be considered and the Internal Revenue Service then approves or does not approve the application.

Correct AnswerverifiedTrue

Which of the following is a reason why an NPO might fail to qualify for tax-exempt status?

Correct AnswerverifiedShow Answer

Many states have worked closely to have uniform policies relating to not-for-profit organizations in the areas of not-for-profit incorporation,charitable solicitation,investing funds,and protecting volunteers.

Correct AnswerverifiedShow Answer

Correct Answer
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The unrelated business income tax (UBIT)...
View Answer

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Prior to 1996,the only sanction that the...
View Answer

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True

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B

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True

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