ACC 317 advance federal taxation

Grant from gates foundation $70,000 charitable contributions received $625,000 Expenses in carrying out its exempt mission $500,000 net income before taxes of landscaping, inc., a wholly owned for-profit subsidiary $400,000

Landscaping inc. remits all of its after-tax profits each year to initiate. Calculate the amount of the federal income tax, if any, for Initiate and for Landscaping.

2 Gray, inc., a private foundation, reports the following items of the income and deductions. Gray is not an exempt operating foundation and it is not eligible for the 1% tax rate.

Interest income $29,000 Rent income $61,000 Dividend income $15,000 Royalty income $22,000 unrelated business income $80,000 Rent expenses $(26,000) Unrelated business expenses $(12,000)

a. Calculate the net investment income.

b. Calculate the tax on the net investment income

c. What is the purpose of the tax on the net investment income?

3 Fish inc., an exempt organization, reports unrelated business income of $500,000 (before any charitable contribution deduction). During the year, Fish makes charitable contributions of $54,000, of which $38,00 are associated with the unrelated trade or business.

a. Calculate Fish’s unrelated business tax income (UBTI).

b. Assume that the charitable contributions are $41,000, of which $38,000 are associated with the unrelated trade or business. Calculate the UBTI.