ExpertMedium1 markMultiple Choice
CPA · Question 62 · Area 4: Entity Taxation
Which of the following organizations is most likely to be classified as a Private Foundation rather than a Public Charity?
Which of the following organizations is most likely to be classified as a Private Foundation rather than a Public Charity?
Answer options:
A.
A church.
B.
A hospital.
C.
A 501(c)(3) organization funded by a single family to make grants to other charities.
D.
An organization that receives >1/3 of its support from the general public.
How to approach this question
Default is Private Foundation. To be Public, you must be a Church/School/Hospital OR pass the Public Support Test (money comes from many people).
Full Answer
C.A 501(c)(3) organization funded by a single family to make grants to other charities.✓ Correct
A 501(c)(3) organization funded by a single family to make grants to other charities.
Organizations that do not meet the definition of a public charity (broad public support or specific type like church/school) are classified as private foundations. A family-funded grant-making entity is the classic private foundation.
Common mistakes
Thinking all 501(c)(3)s are public charities.
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