Skip to Main Content
GiftLaw Pro
Charitable Giving & Tax Information Service
Back to Gift Planning Website
GiftLaw Pro Home   >  Chapter 7 - Charitable Organizations  >  7.2 Private Foundations  >  7.2.6 Taxable Expenditures  >  Basic Quiz

Basic Quiz - 7.2.6 Taxable Expenditures

1. All grants made by private foundations are considered taxable expenditures.
           
2. "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.
           
3. The taxable expenditures of a private foundation are taxed at capital gains rates.
           
4. 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.
           
5. 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.
           
6. 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.
           
7. 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.
           
8. "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.
           
9. "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. John is personally liable for a 2.5% excise tax.
           
10. "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.