ExpertMedium1 markMultiple Choice
CPA · Question 61 · Area 4: Entity Taxation
A tax-exempt university operates a coffee shop open to the public. The shop generates ,000 in profit. The university also has ,000 in dividend income from its endowment. What amount is subject to Unrelated Business Income Tax (UBIT)?
A tax-exempt university operates a coffee shop open to the public. The shop generates ,000 in profit. The university also has ,000 in dividend income from its endowment. What amount is subject to Unrelated Business Income Tax (UBIT)?
Answer options:
A.
0
B.
,000 (minus ,000 specific deduction)
C.
,000
D.
,000
How to approach this question
UBIT = Business Income NOT related to purpose. Passive income (Divs, Interest, Rents) is usually EXEMPT from UBIT.
Full Answer
B.,000 (minus ,000 specific deduction)✓ Correct
,000 (minus ,000 specific deduction)
Unrelated Business Income (UBI) includes income from a trade or business regularly carried on that is not substantially related to the exempt purpose. Passive income like dividends is statutorily excluded from UBIT.
Common mistakes
Including passive investment income in UBIT.
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