What Is the Principle Advantage of Obtaining Section 501(c)3 Status

question 92

Multiple Choice

What is the principle advantage of obtaining section 501(c) 3 status?

• A) The charitable organization is permitted to engage in a trade or business unrelated to its mission without having to pay income taxes.
• B) Donors to the charitable organization are permitted to deduct contributions to the organization in computing their income taxes.
• C) Both (a) and (b) above.
• D) Neither (a) nor (b) above.

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Definitions:

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, such as rent and salaries.

Absorption Costing

A method of costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead in the cost of a product.

Net Operating Income

The total operating profit of a company after all operating expenses, excluding taxes and interest expenses, have been deducted from total revenue.

First Year

Refers to the initial period or the first 12 months of a specific timeframe, often used in the context of financial or operational performance.