Gift shop ubit a local exempt organization that trains

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Reference no: EM13580067

Gift Shop UBIT. A local exempt organization that trains at-risk youth for employment has an annual operating budget of $300,000, which includes revenue from operating a gift shop in a nearby hotel lobby. Gift shop sales result in a profit of $15,000. The organization has $6,500 of endowment income that it earns on permanently restricted net assets. The income from both the gift shop and the endowment is used to support the organization%u2019s exempt purpose. The balance of $278,500 required for annual operations is provided through public support and charges for services.

Required

a. Calculate the UBIT if the corporate tax rate is 15 percent on the first $50,000 of net income and 25 percent on the next $25,000 of income.

b. Assume that the endowment income is reinvested rather than being used to support annual operations. Calculate the amount of unrelated business income.

 

Reference no: EM13580067

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