An Exempt Organization Owns a Building for Which Its Adjusted

question 48

Essay

An exempt organization owns a building for which its adjusted basis is $100,000 at the beginning of the year and $90,000 at the end of the year.One-half of the ground floor is leased to a commercial venture for $10,000 per year.The remainder of the first floor and all of the second floor are used by the exempt organization in carrying out its mission.When the exempt organization constructed the building 20 years ago, it incurred a mortgage of $150,000.The final payment of this mortgage was made in December of the current year.The average acquisition indebtedness for the current year is $30,000.Determine to what extent the building is debt-financed property, the amount of debt-financed income, and the portion of debt-financed income that is treated as unrelated business income.

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Definitions:

New Reserves

Additional funds or assets that financial institutions or countries set aside to meet future liabilities or unforeseen needs.

Excess Reserves

The amount of reserves that banks hold over the minimum required by the central bank to back deposits.

Money Creation

The process by which the money supply of a country is increased through the activities of its central bank and commercial banking system.

Banking System

The network of banks and financial institutions that provide banking services, including deposits, loans, and currency exchange.