For each of the following organizations, determine its UBTI and any related UBIT. If an amount is zero, enter "0". Assume a 21% corporate income tax rate. a. Worn, Inc., an exempt organization, provides food for the homeless people. It operates a thrift store that sells used clothing to the general public. The thrift shop is staffed by four salaried employees. All of the clothes it sells are received as contributions. The $100,000 profit generated for the year by the thrift shop is used in Worn's mission of providing food to homeless people.

a. The UBTI is $ 0 and the UBIT is $ 0.

b. The UBTI is $ 500 (900 - 400) and the UBIT is $.   0. According to IRS, "an organization must pay estimated tax if it expects its tax for the year to be $500 or more.". The estimated UBIT for Small, Inc is only $ 105, less than $ 500.

c. In Care Inc., is considered a profitable company and therefore the UBIT apply. As result, the Federal income tax imposed is $ 134,400 (640,000 * 0.21)

Correct statement, question and options:

For each of the following organizations, determine its UBTI and any related UBIT.  

If an amount is zero, enter "0". Assume a 21% corporate income tax rate.  

a. Worn, Inc., an exempt organization, provides food for the homeless people. It operates a thrift store that sells used clothing to the general public. The thrift shop is staffed by four salaried employees. All of the clothes it sells are received as contributions. The $100,000 profit generated for the year by the thrift shop is used in Worn's mission of providing food to homeless people.  

The UBTI is $ and the UBIT is $.  

b. Small, Inc., an exempt organization, has gross unrelated business income of $900 and unrelated business expenses of $400.  

The UBTI is $ and the UBIT is $.  

c. In Care, Inc., is a § 501(c)(3) exempt organization. It owns a convenience store and gas pumps, which it received as a bequest from a patron. The store/gas pumps entity is operated as StopBy, a C corporation. Because StopBy is profitable, In Care hires a manager and several employees to run the entity. For the current year, StopBy's profit is $640,000. All of this amount is considered a distributed by StopBy to In Care to use in carrying out its exempt mission.  

In Care Inc., is considered a and therefore the UBIT apply. As result, the Federal income tax imposed is $.

Source:

Previous question that can be found at chegg

Explanation:

Let's recall that UBTI or Unrelated Business Taxable Income Tax, represents the type of income that is taxable. On the other hand, UBIT or Unrelated Business Income Tax is the actual tax imposed on the unrelated business income generated by tax-exempt organizations.

a. The UBTI is $ 0 and the UBIT is $ 0.

b. The UBTI is $ 500 (900 - 400) and the UBIT is $.   0. According to IRS, "an organization must pay estimated tax if it expects its tax for the year to be $500 or more.". The estimated UBIT for Small, Inc is only $ 105, less than $ 500.

c. In Care Inc., is considered a profitable company and therefore the UBIT apply. As result, the Federal income tax imposed is $ 134,400 (640,000 * 0.21)