A tax-exempt organization has $5,000 of unrelated business taxable income (UBTI). What is the filing requirement and tax rate?

Answer options:

No filing required because UBTI is less than $10,000.

Must file Form 990-T and pay tax at corporate rates.

Must file Form 990-T but tax is exempt.

Must file Form 990-PF.

How to approach this question

UBIT Rule: If Unrelated Business Income > $1,000, file Form 990-T and pay tax.

Full Answer

B.Must file Form 990-T and pay tax at corporate rates.✓ Correct

An exempt organization with gross income from an unrelated trade or business of $1,000 or more must file Form 990-T and pay tax on the UBTI. The tax rate depends on whether the org is a corporation or trust.

Common mistakes

Thinking charities never pay tax.

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