SEE - Special Enrollment Exam Quiz: Tax Exempt Organizations

What this quiz covers

This quiz focuses on Tax Exempt Organizations, giving you a quick way to practice the rules, question types, and explanations that matter most for SEE - Special Enrollment Exam.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

Question 1

1. A trade or business that sells merchandise received by gift or contribution is not an unrelated trade or business only if the merchandise is sold to the organization's members rather than to the general public and the sales price does not exceed fair market value.
2. A trade or business is not an unrelated trade or business if it is carried on primarily for the convenience of the organization's members, but this exception does not apply to a business carried on for the convenience of its students or patients.
3. A trade or business is not an unrelated trade or business if substantially all of the work in carrying it on is performed for the organization without compensation, even if the business is regularly carried on and produces a profit. (correct answer)
4. A trade or business is substantially related to an organization's exempt purpose only if it is not regularly carried on and is conducted without any paid staff, because the relationship must be judged by the manner in which the activity is conducted.

Question 2

1. The tax on taxable expenditures under § 4945 is imposed on the foundation manager, and the private foundation is liable only if the manager fails to agree to a correction of the expenditure.
2. An act of self-dealing between a private foundation and a disqualified person gives rise to an excise tax imposed on the disqualified person, and a foundation manager may be separately taxed for knowing participation in the act. (correct answer)
3. A supporting organization described in § 509(a)(3) is not a private foundation and is therefore exempt from every excise tax imposed by Chapter 42 of the Code, including the tax on excess benefit transactions.
4. The tax on excess business holdings under § 4943 is imposed on the disqualified persons holding the excess business holdings, rather than on the private foundation, because the foundation is merely the passive recipient of the holdings.

Question 3

1. It may not attempt to influence legislation under any circumstances, but it may participate in political campaigns through a separate segregated fund if no exempt-purpose funds are used for the campaign activity.
2. It may participate in a nonpartisan voter registration drive, but it may not publish a neutral voter education guide presenting all candidates' positions because any mention of a candidate is prohibited campaign intervention.
3. It is absolutely prohibited from participating in any political campaign for or against a candidate for public office, and it may engage in legislative lobbying only to an insubstantial extent unless it elects the expenditure test under § 501(h). (correct answer)
4. It may engage in unlimited legislative lobbying if the lobbying directly furthers its exempt purpose, and it may participate in political campaigns as long as the participation is not the organization's primary activity.

Question 4

1. A church described in § 501(c)(3) must file Form 990 unless it has no gross receipts, but it may omit Schedule B because the names and addresses of contributors are confidential.
2. A private foundation is required to file Form 990-PF, and the return is open to public inspection, while a church described in § 501(c)(3) is generally excused from filing Form 990. (correct answer)
3. An organization with unrelated business taxable income must file Form 990-T and attach it to its Form 990, and the Form 990-T is then open to public inspection as part of the Form 990.
4. A private foundation must file Form 990-PF, but it is not required to make the return available for public inspection because the form contains the names of its managers and substantial contributors.

Question 5

1. Royalties are generally excluded from unrelated business taxable income, but payments for the use of an organization's name or logo may be treated as unrelated business income if the organization provides significant services in connection with the arrangement. (correct answer)
2. Rents from real property are always excluded from unrelated business taxable income, regardless of whether the property is debt-financed or the rent is determined by reference to the tenant's net profits.
3. Payments received for the use of an organization's name or logo are generally excluded as royalties if the organization is described in § 501(c)(3), but are generally taxable if the organization is described in § 501(c)(6).
4. Advertising income from an exempt organization's periodical is treated as rent from personal property and is excluded from unrelated business taxable income if the periodical's editorial content furthers the organization's exempt purpose.

Question 6

1. The church must file Form 990 because its total assets at the end of the taxable year exceed $500,000.
2. The church may file Form 990-EZ because its gross receipts for the year are less than $200,000.
3. The church must file Form 990-N because it is not a private foundation and its gross receipts do not exceed $200,000.
4. The church is not required to file any Form 990-series information return for 2025 because churches are excepted from the annual return requirement. (correct answer)

Question 7

1. Both payments are excluded from unrelated business taxable income because the magazine and the gala advance the orchestra's exempt purposes.
2. The $20,000 advertising payment is included in unrelated business taxable income; the $15,000 sponsorship payment is a qualified sponsorship payment and is not included. (correct answer)
3. The $15,000 sponsorship payment is included in unrelated business taxable income because the law firm's name and logo were displayed, while the $20,000 advertising payment is excluded because the magazine furthers the orchestra's exempt purpose.
4. Both payments are included in unrelated business taxable income because each business received a promotional benefit from the orchestra's activities.

Question 8

1. The purchase is not an act of self-dealing because the foundation paid no more than fair market value and the transaction was approved by the entire board.
2. The purchase is not an act of self-dealing because the wife's position as a board member does not make her a disqualified person with respect to the foundation.
3. The purchase is an act of self-dealing under IRC § 4941 even though the price equaled fair market value, and the wife is subject to the initial excise tax on the amount involved. (correct answer)
4. The purchase is an act of self-dealing only if the foundation paid more than fair market value for the building.

Question 9

1. The forum is permissible because the church did not use more than an insubstantial part of its resources on the event.
2. The forum is permissible because the church did not make a contribution to the candidate or to a political committee.
3. The forum is permissible because the church advertised it only to its members and did not use broadcast media or paid advertising.
4. The forum is prohibited political campaign intervention, and the church may be subject to excise taxes and may lose its exemption. (correct answer)

Question 10

1. The excess compensation is subject to an excise tax imposed on the clinic, and the clinic's exempt status is automatically revoked for 2025.
2. The excess compensation is not subject to excise tax because the executive director is not a substantial contributor and the board approved the payment.
3. The entire $450,000 of compensation is treated as an excess benefit because the executive director is a disqualified person and the board did not review comparable data.
4. The excess compensation is subject to an excise tax imposed on the executive director as a disqualified person, and organization managers who knowingly participated may also be subject to an excise tax. (correct answer)

Question 11

1. The organization is not subject to any excise tax because its grassroots lobbying expenditures of $30,000 did not exceed the grassroots nontaxable amount.
2. The organization is subject to the IRC § 4911 excise tax on $2,500, the amount by which its total lobbying expenditures exceed the lobbying nontaxable amount. (correct answer)
3. The organization is subject to the IRC § 4911 excise tax on the full $125,000 of lobbying expenditures because the total exceeded the lobbying nontaxable amount.
4. The organization's tax exemption is automatically revoked for 2025 because its total lobbying expenditures exceeded the $122,500 lobbying nontaxable amount.

Question 12

1. $20,000 (correct answer)
2. $50,000
3. $30,000
4. $0

Question 13

1. Its 2025 qualifying distributions are $95,000, so $5,000 of the 2025 distributable amount must still be distributed by December 31, 2026, because the grant to the other foundation does not count as a qualifying distribution. (correct answer)
2. It has met its 2025 distribution requirement because its total disbursements of $115,000 exceeded the $100,000 distributable amount.
3. It has met its 2025 distribution requirement because the $20,000 grant was made with expenditure responsibility and therefore counts as a qualifying distribution.
4. Its 2025 qualifying distributions are $85,000, so $15,000 of the 2025 distributable amount must still be distributed by December 31, 2026, because administrative expenses are not qualifying distributions.

Question 14

1. None of the sales are subject to unrelated business income tax because all of the store's net proceeds are used for the charity's exempt programs.
2. All of the store's sales are unrelated business taxable income because the store is regularly carried on throughout the year.
3. The sales of donated merchandise are not unrelated business taxable income, but the sales of the purchased craft items are unrelated business income. (correct answer)
4. The sales of donated merchandise are unrelated business taxable income, while the sales of the purchased craft items are not because they are the charity's newer activity.

Question 15

1. A Type III supporting organization must be operated in connection with one or more supported organizations, must satisfy both a responsiveness test and an integral-part test, and may not be controlled by disqualified persons other than foundation managers and its supported organizations. (correct answer)
2. A Type I supporting organization is operated, supervised, or controlled by a supported organization, while a Type II supporting organization is operated in connection with one or more supported organizations and, like a Type III organization, must satisfy the integral-part test.
3. A supporting organization may be controlled by disqualified persons if those persons are also substantial contributors to the supported organization and the supported organization has approved the arrangement in writing as consistent with its exempt purposes.
4. A supporting organization is not a private foundation only if it is organized and operated exclusively for the benefit of a single supported organization that is a church or a school described in § 170(b)(1)(A)(i) or (ii).