ExpertHard1 markMultiple Choice
CPA · Question 70 · Area V: Entity Taxation
A tax-exempt organization has $5,000 of unrelated business taxable income (UBTI). What is the filing requirement and tax rate?
A tax-exempt organization has $5,000 of unrelated business taxable income (UBTI). What is the filing requirement and tax rate?
Answer options:
A.
No filing required because UBTI is less than $10,000.
B.
Must file Form 990-T and pay tax at corporate rates.
C.
Must file Form 990-T but tax is exempt.
D.
Must file Form 990-PF.
How to approach this question
UBIT Rule: If Unrelated Business Income > $1,000, file Form 990-T and pay tax.
Full Answer
B.Must file Form 990-T and pay tax at corporate rates.✓ Correct
B
An exempt organization with gross income from an unrelated trade or business of $1,000 or more must file Form 990-T and pay tax on the UBTI. The tax rate depends on whether the org is a corporation or trust.
Common mistakes
Thinking charities never pay tax.
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