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GiftLaw Pro Home   >  Chapter 7 - Charitable Organizations  >  7.1 Public Charities  >  7.1.3 Unrelated Business Income Taxation (UBIT) Exceptions  >  Basic Quiz

Basic Quiz - 7.1.3 Unrelated Business Income Taxation (UBIT) Exceptions

1. Dividends, interest, annuities, rents, royalties and most capital gains are taxed as ordinary income under the UBIT rules.
           
2. Income from thrift stores, trade shows, bingo parlors and snack machines are excluded from UBIT.
           
3. A good way for a charity to receive rent from real property without incurring substantial costs for management and without providing significant services is to create a net lease.
           
4. Charity "B" receives $10,000 a month from a rental agreement between the charity and a credit card company. The agreement is for an office building, all the furniture, and 1,000 computers and telephones. The amount attributable to the building is $4,000; the amount attributable to the personal property is $6,000. The rental agreement income is not subject to UBIT.
           
5. Charity "B" holds the exclusive patent to a new form of dictation machine. Charity "B" receives royalty payments from other business producing the machine. The payments received are not subject to UBIT.
           
6. The headquarters of a nationally known charity contains a cafeteria in its office building. The employees of the charity are the only patrons of the cafeteria, and the cafeteria is open for lunch five days a week. The profits earned from the cafeteria's operation are subject to UBIT.
           
7. The National Organization for the Prevention of Cruelty to Animals runs a program at local hospitals. For a small fee, NOPCA will bring animals to the hospital once a week to interact with patients in the children's wing of the hospital. The stated purpose of the NOPCA is to rescue neglected and abused animals. The income received from the hospital visits is subject to UBIT.
           
8. The North American Charitable Society (NACS), a qualified charity, owns 100 acres of land in Montana. NACS was approached about possibly renting the land to a private hunting lodge. Any income derived from the land would be taxed as UBTI.
           
9. Rents received from the use of personal property are not subject to UBIT if the personal property is rented in a mixed lease with real property and the rents attributed to the personal property are incidental.
           
10. Royalties received by a charity are considered passive income.