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Option #1: NFP financial reporting The Four Corners Theater’s mission is to increase access to the...

Option #1: NFP financial reporting

The Four Corners Theater’s mission is to increase access to the arts for the community of Four Corners. The Theater group owns a debt-financed theater and puts on several plays throughout the year, as well as providing facilities for many other activities. Four Corner’s Theater is a well-established, not-for profit organization exempt under IRC Sec. 501(c)(3).

Identify whether the following activities would be subject to unrelated business income tax (UBIT) and explain why or why not.

  1. Rental of the facility to the high school drama club.
  2. Fees for summer acting classes for primary school students.
  3. Sale of tickets to plays put on by the Four Corner’s Theater group.
  4. Sale of season ticket membership list to a local book store.
  5. Rental of two apartments in the facility.
  6. Rental of meeting space to other local 501(c)(3) organizations for their monthly meetings.
  7. Internet sales of gift shop items with the Four Corner’s Theater logo.
  8. Lease of the facility’s parking lot to the local university on football game days.

Solutions

Expert Solution

Activity UBIT or Not Resaon
Rental of the facility to the high School drama club Yes Since this is related to educational activity which is exempt under 501(c(3)
Fees for summer acting classes for primary school students Yes Since this is related to educational activity which is exempt under 501(c(3)
Sale of tickets to plays put on by the Four Corner's Theater Group No As this pertains to regular course of business or trade which is not related to any activity under 501(c(3)
Sale of season ticket membership list to a local book store No As this pertains to regular course of business or trade which is not related to any activity under 501(c(3)
Rental of two apartments in the facility No As this pertains to regular course of business or trade which is not related to any activity under 501(c(3)
Rental of meeting space to other local 501(c(3) organisations for their monthly meetings Yes This is UBIT because this is exempt under 501(c(3)
Internet sales of gift shop items with Four Corner's Theatre logo No As this pertains to regular course of business or trade which is not related to any activity under 501(c(3)
Lease of the facility's parking lot to the local university on football game days Yes Since this is related to educational activity which is exempt under 501(c(3)

jeff jeffy answered 6 months ago
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