Tax-Lesson 2-4 - Tax-Exempt Organizations  

Is your organization seeking recognition of tax-exempt status from the Internal Revenue Service? In this seminar, you will be able to follow the procedures for your organization to become tax-exempt. It explains the procedures you must follow to obtain an appropriate ruling or determination letter recognizing exemption for religious organizations and other nonprofit businesses. 

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You will need IRS Publication 557 to complete this topic.

1. Most organizations seeking recognition of exemption from federal income tax must use specific application forms prescribed by the IRS. To seek recognition of exemption the IRS currently requires you to file

A. Form 1023.
B. Form 1024.
C. A letter request.
D. Both A and B above.

2. Every exempt organization must have an EIN, whether or not it has any employees. An EIN

A. Is received once exemption status is approved.
B. Is required before an exemption application is submitted.
C. Is not required for exempt organizations since they are exempt from paying taxes.
D. None of the above.

3. Each application for exemption must be accompanied by

A. A conformed copy of your organization's Articles of incorporation (and the Certificate of incorporation, if available).
B. A conformed copy of your organization's Articles of Association.
C. A conformed copy of your organization's trust indenture, constitution, or other enabling document.
D. Any of the above.

4. If your organization does not have an organizing document, it will not qualify for exempt status.

True False

5. A copy that agrees with the original and all amendments to it.

A. Original document.
B. Written declaration.
C. Conformed copy.
D. None of the above.

6. The IRS may require you to provide additional information necessary to clarify the nature of your organization such as

A. Representative copies of advertising placed or copies of publications, such as magazines.
B. Distributed written material used for expressing views on proposed legislation.
C. Copies of leases, contracts, or agreements into which your organization has entered.
D. Any of the above.

7. A ruling or determination letter will be issued to your organization if its application and supporting documents establish that it meets the particular requirements of the section under which it is claiming exemption. If during the period before the date of the ruling or determination letter, its purposes and activities were those required by law, a ruling or determination letter recognizing exemption is usually

A. Effective as of the date of formation of an organization.
B. Effective as of the date specified in the letter.
C. Both A and B above.
D. None of the above.

8. A ruling or determination letter issued to a central organization recognizing on a group basis the exemption under section 501(c) of subordinate organizations on whose behalf the central organization has applied for recognition of exemption. This is a (an)

A. Group exemption letter.
B. Adverse notice of determination.
C. Power of attorney.
D. Disclosure statement.

9. A group exemption letter no longer has effect, for either a particular subordinate or the group as a whole, when

A. The central organization notifies the IRS that it is going out of existence.
B. The central organization notifies the IRS, by its annual submission or otherwise, that any of its subordinates will no longer fulfill the conditions for continued effectiveness.
C. The IRS notifies the central organization or the affected subordinate that the the group exemption letter will no longer have effect for some or all of the group because the conditions for continued effectiveness of a group exemption letter have not been fulfilled.
D. Any of the above.

10. The following are organizations exempt from federal income tax under section 501(c) that are not required to file an annual information return, except

A. A church.
B. A school below college level affiliated with a church.
C. A political organization that has $25,000 or more in gross receipts for the tax year.
D. All of the above.

11. Exempt organization, other than private foundations, must file their annual information returns on

A. Form 1023 or 1023-EZ.
B. Form 8868 or 8868-EZ.
C. Form 990 or 990-EZ.
D. Form 1024 or 1024-EZ.

12. Employers of organizations exempt from federal income tax, who pay wages to employees are also exempt from withholding, depositing, paying, and reporting federal income tax, social security and Medicare (FICA) taxes, and federal unemployment tax (FUTA).

True False

13. A payment a donor makes to a charity partly as a contribution and partly for goods or services.

A. Charitable contribution.
B. Quid pro quo contribution.
C. Tax exempt organization donation.
D. Exchange donation.

14. If an organization receives charitable deduction property and within 3 years sells, exchanges, or otherwise disposes of the property, the organization must file Form 8282 unless the property is consumed or distributed for charitable purposes or the property is valued at

A. $75.
B. $250 or more.
C. $500 or less.
D. $10,000 or less.

15. Solicitations for contributions or other payments by certain exempt organizations (including lobbying groups and political action committees) must included a statement that

A. States that they are exempt form federal tax.
B. States that they should not overstate the property's value.
C. Payments to those organizations are not deductible as charitable contributions for federal income tax purpose.
D. All of the above.

16. Certain exempt organizations must disclose to the IRS or to the public certain information about their activities. The disclosure requirement applies to a fund-raising solicitation if

A. The organization soliciting the funds normally has gross receipts over $100,000 per year.
B. The solicitation is part of a coordinated fundraising campaign that is soliciting more than 10 persons during the year.
C. The solicitation is made in written or printed form, by television or radio, or by telephone.
D. All of the above.

17. To qualify for exemption from federal income tax, the organization can be an individual or a partnership.

True False

18. An organization may qualify for exemption from federal income tax if its organized and operated exclusively for educational services.

True False

19. To determine whether an organization meets the religious purposes test of section 501(c)(3), the IRS maintains

A. That the particular religious beliefs of the organization are truly and sincerely held.
B. That the practices and rituals associated with the organization's religious belief or creed are not illegal or contrary to clearly defined public policy.
C. That the particular religious beliefs and actions, as contrasted with its beliefs contrary to well established and clearly defined public policy.
D. Both A and B above.

20. In determining whether an admittedly religious organization is also a church, the IRS accepts any and every assertion that the organization is also a church because beliefs and practices vary so widely.

True False

 

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Revised: 11/16/14