ExpertHard1 markMultiple Choice
CPA · Question 71 · Area V: Entity Taxation
Which of the following is a primary difference between a Public Charity and a Private Foundation?
Which of the following is a primary difference between a Public Charity and a Private Foundation?
Answer options:
A.
Public charities receive broad public support, while private foundations are typically funded by a single source.
B.
Private foundations are tax-exempt, but public charities are not.
C.
Public charities can engage in unlimited lobbying.
D.
Private foundations do not file annual returns.
How to approach this question
Public Charity = Money from everyone (Red Cross). Private Foundation = Money from one family/company (Gates Foundation).
Full Answer
A.Public charities receive broad public support, while private foundations are typically funded by a single source.✓ Correct
A
Public charities (IRC §509(a)) generally receive more than one-third of their support from the general public or government. Private foundations are typically funded by a single individual, family, or corporation and are subject to stricter rules (excise taxes, distribution requirements).
Common mistakes
Thinking the difference is about the type of work they do.
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