Engaging in a Prohibited Transaction Can Result in an Exempt

question 6

True/False

Engaging in a prohibited transaction can result in an exempt organization being subject to Federal income tax, but cannot cause it to lose its exempt status unless the exempt organization repeats the prohibited transaction.

---

Definitions:

Payment

The act of transferring money, goods, or services as an exchange to fulfil a legal obligation or purchase.

Outstanding Balance

This term refers to the amount of money owed on a loan or credit account that has not yet been repaid.

Cheque

A written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer.

Invoice

A document indicating the sale transaction and requesting payment for goods or services provided.