The Organization Shelter the Needy Is Completing Its Form 990

question 46

Multiple Choice

The organization Shelter the Needy is completing its Form 990 and it is trying to determine if it has unrelated business income on which it must pay taxes. Which of the following would be subject to unrelated business income taxes?

• A) The Shelter sold art work it had received as a donation.
• B) Volunteers raised several thousand dollars in a marathon sponsored for the benefit of the Shelter.
• C) The Shelter earned revenues from the self-service laundry facilities it provides for the benefit of tenants of its low-income temporary housing facilities.
• D) None of the items listed would be subject to unrelated business income taxes.

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Definitions:

Fixed Manufacturing Expenses

Costs that do not vary with the level of production, such as rent, salaries, and equipment depreciation.

Selling and Administrative Expenses

Expenses related to the sale of products or services and the general administration of a business, excluding production costs.

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that remain constant regardless of the level of production, such as depreciation on factory equipment or salaries of factory supervisors.

Unit Product Cost

represents the total cost to produce one unit of product, including direct materials, direct labor, and overhead.