7.2.6 Basic Quiz -- Taxable Expenditures

All grants made by private foundations are considered taxable expenditures.

True False

"B," a private foundation created to prevent cruelty to animals, has spent $30,000 on lobbying the state legislature to overturn a law that prohibits more than 10 people protesting on a public sidewalk. This is a taxable expenditure.

True False

The taxable expenditures of a private foundation are taxed at capital gains rates.

True False

Any manager who knowingly approves of or participates in the taxable expenditure is subject to a 7.5% excise tax on the amount of the taxable expenditure.

True False

The most a manager of a private foundation may be required to pay as an excise tax for his or her participation in a taxable expenditure is $5,000.

True False

Should a private foundation fail to correct the taxable expenditure, the foundation will be assessed another excise tax, this time at 100% of the taxable expenditure amount.

True False

Should the manager of a private foundation fail to correct the taxable expenditure, the manager will be assessed another excise tax, this time at 50% of the taxable expenditure amount, capped at $50,000.

True False

"B" foundation's board members hired John to be the new manager of the foundation's assets. One year later, the IRS determined that John has been making numerous taxable expenditures of "B" foundation's funds without the board's approval or even knowledge. The foundation is subject to a 20% excise tax.

True False

"B" foundation's board members hired John to be the new manager of foundation's assets. One year later, the IRS determined that John has been making numerous taxable expenditures of "B" foundation's funds without the board's approval or even knowledge. Each member of the board is subject to a 5% excise tax.