Which of the Following Statements Regarding the Unrelated Business Income

question 90

Multiple Choice

Which of the following statements regarding the unrelated business income tax is not correct?

• A) Unrelated business income is income from activities not related to the exempt purpose of the organization.
• B) The unrelated business income tax is levied because the exempt organization is engaging in substantial commercial activities.
• C) If the unrelated business income tax were not levied, nonexempt organizations would be placed at a substantial disadvantage when trying to compete with the exempt organization.
• D) The tax rate that is applied to unrelated business taxable income is a flat 30% income tax rate.
• E) All of these statements are correct.

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Definitions:

Necessary Cash

The minimum amount of cash required by a company to carry out its day-to-day operations.

Contra Asset Account

An account on a company's balance sheet representing deductions from the gross amount of an asset, such as accumulated depreciation on fixed assets.

Allowance for Doubtful Accounts

An accounting method used to estimate the portion of a company's receivables that may not be collected, reducing the accounts receivable balance accordingly.

Uncollectible Accounts

Uncollectible accounts are receivables that a company deems uncollectable and likely will not be recovered, often written off as a bad debt expense.