Reference no: EM13550793

1. Which of the following are organizations exempt under § 501(c)(3)?
a. University of Richmond.
b. Salvation Army.
c. Chamber of Commerce.
d. Only a. and b. are § 501(c)(3) organizations.
e. All of the above are § 501(c)(3) organizations.

2. Which of the following is not an example of an exempt organization?
a. Religious, charitable, or educational organization.
b. Business leagues.
c. Social clubs.
d. Credit Unions.
e. All of the above can be exempt from tax.

3. Buckeye, Inc., a qualifying § 501(c)(3) organization, incurs lobbying expenditures of $250,000 during the taxable year. Exempt purpose expenditures are $1,700,000. If Buckeye makes the election under § 501(h) to make lobbying expenditures on a limited basis, its tax liability resulting from the lobbying expenditures is:
a. $3,750.
b. $58,750.
c. $62,500.
d. $88,125.
e. None of the above.

4. Which of the following statements regarding intermediate sanctions is correct?
a. Intermediate sanctions are assessed by the IRS.
b. The tax is imposed on the exempt organization and the disqualified person.
c. Both a first-level tax and a second-level tax may apply.
d. A 10% or 25% tax rate applies in calculating the amount of the tax liability.
e. All of the above are correct.

5. Cork, Inc. receives its support from the following sources.
Governmental unit A, for services rendered $15,000
General public, for services rendered 30,000
Gross investment income 10,000
Contributions from individual substantial 20,000
contributors (disqualified persons)
Which of the following statements is correct? a. Cork, Inc., is a private foundation because it satisfies the external support test and fails
the internal support test.
b. Cork, Inc., is a private foundation because it satisfies both the external support test and the internal support test.
c. Cork, Inc., is not a private foundation because it satisfies both the external support test and the internal support test.
d. Cork, Inc., is a private foundation because it fails both of the internal and
external support tests.
e. None of the statements is true.

6. The Local Church operates a gift shop in its parish house. The total income of the church is $500,000. Of this amount, $400,000 comes from offerings and $100,000 comes from the net income of the gift shop. The gift shop operations are conducted equally by three
volunteers. Which of the following statements is correct?
a. The $500,000 is unrelated business income.
b. The $100,000 of gift shop net income is unrelated business income.
c. The $100,000 is unrelated business income because the gift shop is a feeder
organization.
d. None of the $500,000 is unrelated business income.
e. The unrelated business income tax does not apply to churches.

7. Cotton, Inc., a tax-exempt organization, has $700,000 of net unrelated business income. Total charitable contributions (all associated with the unrelated trade or business) are $60,000. Assuming that the $60,000 is deducted in calculating the $700,000 net unrelated business income, what is Cotton's unrelated business taxable income?
a. $0.
b. $640,000.
c. $700,000.
d. $760,000.
e. Some other amount.

8. Dogwood, Inc., a tax-exempt organization, leases a building and equipment to Tree Corporation. The rental income from the building is $650,000 and from the equipment is $60,000. Rental expenses are $75,000 for the building. What adjustment must be made
to net unrelated business income?
a. ($635,000).
b. ($575,000).
c. ($60,000).
d. $635,000.
e. Some other amount.

9. Which of the following exempt organizations are required to file Form 990-N, the epostcard?
a. Federal agencies.
b. Churches.
c. Exempt organizations whose annual gross receipts do not exceed $50,000.
d. Private foundations.
e. None of these entities must file with the IRS.

10. Which of the following statements are correct?
a. If an exempt organization has annual gross receipts of less than $200,000, it can file
Form 990-EZ.
b. The due date for filing Form 990 is the 15th day of the fifth month after the end of the
tax year.
c. If the gross income from an unrelated trade or business is less than $1,000, it is not
necessary to file a return associated with the unrelated business income tax.
d. Only a. and c. are correct.
e. a., b., and c. are all correct.

11. At the time of his death, Ruark owned stock as follows.
Date of Death Value Six
Value Months Later
Stock in Walnut Corporation $550,000 $475,000
Stock in Hazel Corporation 260,000 280,000
The executor sells the Walnut Corporation stock seven months after Ruark's death for $500,000. The executor sells the Hazel stock four months after Ruark's death for $265,000. If the alternate valuation date is properly elected, the value of Ruark's estate as to these stocks is:
a. $810,000.
b. $755,000.
c. $740,000.
d. $725,000.
e. None of the above.

12. In 1986, Danny and Faith (father and daughter) acquire real estate listing title as: "Danny and Faith, joint tenants with the right of survivorship." Of the $200,000 purchase price, $90,000 was furnished by Danny and $210,000 by Faith. The $140,000 Faith provided had been received by her as an inheritance from her mother. In 2013, Faith predeceases Danny at a time when the property is worth $500,000. As to this property, Faith's gross estate includes:
a. $350,000.
b. $250,000. c. $200,000.
d. $150,000.
e. None of the above.

13. Danny and Marina are husband and wife and live in Arizona. In 1989, they purchased a commercial annuity for $400,000 using community funds. Under the terms of the contract, $3,750 a month is payable to them for Danny's life. If Danny predeceases Marina, $3,300 a month is payable to Marina. Danny dies in 2013 when the replacement value of Marina's annuity is $300,000. As to the annuity, Danny's estate includes:
a. $0.
b. $150,000.
c. $200,000.
d. $400,000.
e. None of the above.

14. Wilkins and Antonia are husband and wife and have always resided in New York, not a community property state. In 1982, they purchase land as tenants by the entirety for $250,000 with Wilkins providing $150,000 and Antonia the balance of $100,000. In 2013, Antonia dies, Wilkins surviving, when the real estate is worth $600,000. As to this property, Antonia's gross estate includes:
a. $0.
b. $225,000.
c. $250,000.
d. $300,000.
e. None of the above.

15. Beverly and Broderick are husband and wife and have always lived in Pennsylvania, not a community property state. In 1982, using joint funds, they purchased an insurance policy (maturity value of $400,000) on Broderick's life. Their son, Shane, was designated as the beneficiary. In 2013, and at a time when the policy has a replacement cost of $80,000, Broderick
dies. As to the $400,000 insurance proceeds paid to Shane, a. $200,000 is included in Broderick's gross estate, and Beverly makes a gift of $200,000.
b. $400,000 is included in Broderick's gross estate.
c. Beverly makes a gift of $400,000.
d. $80,000 is included in Broderick's gross estate.
e. None of the above

16. At the time of her death, Christy owned stock as follows.
Date of Death Value Six Value Months Later
Stock in Beech Corporation $350,000 $280,000
Stock in Pecan Corporation 200,000 180,000
The executor sells the Beech Corporation stock seven months after Christy's death for $250,000.
The executor sells the Pecan stock four months after Christy's death for $150,000. If the
alternate valuation date is not elected, the value of Christy's estate as to these stocks is:
a. $550,000.
b. $480,000.
c. $460,000.
d. $430,000.
e. None of the above.

17. Alexandria made taxable gifts of cash equal to $250,000 in 1976, $350,000 in 1980, and $150,000 early in 2007. Alexandria dies late in 2013 leaving a taxable estate of $700,000. In applying the unified tax rate schedules (for estate tax purposes), the executor must first
determine the tax on:
a. $700,000.
b. $850,000.
c. $1,200,000.
d. $1,450,000.
e. None of the above.

18. Sienna made taxable gifts of cash equal to $550,000 in 1976, $300,000 in 1979, and $150,000 early in 2008. Sienna dies late in 2013 leaving a taxable estate of $500,000. In applying the unified tax rate schedules (for estate tax purposes), the executor must first determine the tax on:
a. $500,000.
b. $650,000.
c. $950,000.
d. $1,500,000.
e. None of the above.

19. Pursuant to Frederick's will, Willa (Frederick's sister) inherits property. Three years later Willa dies. Federal estate tax attributable to the inclusion of the property in Frederick's gross estate was $80,000. The estate tax attributable to the inclusion of the property in Willa's gross estate is $60,000. Willa's credit for tax on prior transfers is:
a. $36,000. b. $48,000.
c. $60,000.
d. $64,000.
e. None of the above.

20. Pursuant to Gomer's will, Tyra (Gomer's sister) inherits property. Seven years later Tyra dies. Federal estate tax attributable to the inclusion of the property in Gomer's gross estate was $120,000. The estate tax attributable to the inclusion of the property in Tyra's gross estate is $90,000. Tyra's credit for tax on prior transfers is:
a. $36,000.
b. $48,000.
c. $54,000.
d. $72,000.
e. None of the above.

21. The trustee of the Fillmore Trust must distribute current-year annual accounting income to its sole beneficiary, Annie. The trust's personal exemption is
a. $600.
b. $300.
c. $100.
d. $0.
e. Some other amount.

22. Beneficiary Lainie received $40,000 from the Grant Trust. Applying the trustee's discretion, $20,000 of the distribution was from accounting income, and $20,000 was from trust corpus. Beneficiary Alice received $30,000 from the trust, all of which was from accounting income. The trust generated $30,000 in cost recovery deductions. Its accounting income for the
year was $50,000. How much can Lainie deduct with respect to the cost recovery deductions that Grant generated?
a. $30,000.
b. $18,000.
c. $12,000.
d. $0.
e. Some other amount.

23. The Hayes Trust incurred the following items during the year.
Taxable interest received $200,000
Tax-exempt interest received 400,000
Charitable gift paid 100,000
Tax preparation fees paid 15,000
What is the Trust's deduction for the tax preparation fees?
a. $0.
b. $5,000.
c. $10,000.
d. $15,000.
e. None of the above.

24. The McKinley Trust has distributable net income for the year of $300,000 and no income from tax-exempt sources. Under the terms of the trust instrument, the trustee must distribute $240,000 to Gilda and $160,000 to Mandy. After paying these amounts, the trustee is empowered to make additional distributions at its discretion. Exercising this authority, the trustee distributes an additional $75,000 to Gilda and $75,000 to Mandy. How much gross income from the trust must Gilda recognize?
a. $180,000.
b. $171,818.
c. $120,000.
d. $80,000.
e. None of the above.

25. The Harding Trust has distributable net income for the year of $200,000 and no income from tax-exempt sources. Under the terms of the trust instrument, the trustee must distribute $75,000 to Taylor and $125,000 to Christina. After paying these amounts, the trustee is empowered to make additional distributions at its discretion. Exercising this authority, the trustee distributes an additional $30,000 to Taylor and $30,000 to Christina. How much gross income from the trust must Taylor recognize?
a. $200,000.
b. $125,000.
c. $96,154.
d. $75,000.
e. $30,000.

26. The Buchanan Trust generated a net operating loss this year of $200,000. The Trust terminates December 31, 2013. Marcus receives $100,000 of corpus upon termination and Richard receives the remaining $150,000. Both Marcus and Richard are calendar year taxpayers. Which of the following statements is correct?
a. Neither beneficiary gets a deduction this year.
b. Marcus deducts $100,000.
c. Richard deducts $120,000.
d. Marcus and Richard each deduct $100,000.
e. Marcus, Richard, and the Trust each deduct $66,667.

27. During the current year, a trust received $160,000 of taxable interest income, paid trustee's commissions of $40,000, and had no other income or expenses. The trust instrument requires that $40,000 be paid annually to Beverly, and $80,000 be paid annually to Christian. How much income must Beverly and Christian recognize for tax purposes?
a. $50,000 by Beverly and $100,000 by Christian.
b. $60,000 by Beverly and $60,000 by Christian.
c. $40,000 by Beverly and $80,000 by Christian.
d. $80,000 by Beverly and $40,000 by Christian.
e. None of the above.

28. The Carter Estate generated distributable net income this year of $180,000, one-third of which was tax-exempt interest, and the balance of which was long-term capital gain. Curtis Carter, the sole income beneficiary of the Estate, received a distribution of the entire $210,000 fiduciary income of the entity. How does Curtis report the distribution?
a. $210,000 ordinary income.
b. $140,000 long-term capital gain, $70,000 exempt interest.
c. $180,000 ordinary income.
d. $120,000 long-term capital gain, $60,000 exempt interest.
e. $60,000 long-term capital gain, $120,000 exempt interest.

29. The Coolidge Estate generated distributable net income this year of $150,000, one-tenth
of which was tax-exempt interest, and the balance of which was long-term capital gain.
Isla Coolidge, the sole income beneficiary of the Estate, received a distribution of the
entire $250,000 fiduciary income of the entity. How is this distribution accounted for by
Isla?
a. $250,000 ordinary income.
b. $225,000 long-term capital gain, $25,000 exempt interest.
c. $150,000 ordinary income.
d. $15,000 long-term capital gain, $135,000 exempt interest.
e. $135,000 long-term capital gain, $15,000 exempt interest.

30. The trust instrument provides that Louis, the sole income beneficiary, is to receive
$200,000 annually. If the trust accounting income is not sufficient to pay this amount,
the trustee is empowered to invade corpus to the extent necessary. During the current
year, the trust has distributable net income of $300,000, including $90,000 of tax-exempt
interest. In accordance with the trust instrument, $200,000 is paid to Louis. How much
income is taxable to Louis for the current year?
a. $60,000.
b. $140,000.
c. $210,000.
d. $300,000.
e. None of the above.