5.4.1 Basic Quiz -- Jeopardizing the Charitable Interest

Private foundations are subject to the rules on jeopardy investments.

True False

A penalty tax of 10% is levied on jeopardy investments.

True False

Trading on margin is never considered a jeopardy investment.

True False

The tax levied on jeopardy investments is voluntary.

True False

Unbeknown to Bob, one of three managers at the Builder's Foundation, some of the private foundation's assets were invested in inherently risky oil wells. Bob is not subject to a penalty tax.

True False

If Bob, from the Builder's Foundation, knowingly made a jeopardy investment, he would be subject to a 10% penalty tax.

True False

Trustees of charitable remainder trusts (CRTs) are subject to the restrictions of Sec. 4944.

True False

There is no specific definition of "jeopardy investments" in the IRS Code.

True False

If the private foundation continues with a jeopardy investment after the imposition of the 10% penalty, an additional 25% penalty will be imposed.

True False

A foundation manager is wise to consider the expected return of an investment and the risk associated with an investment strategy before investing.