Discussion:Exempt Org Unrelated Bus. Incom

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Discussion Forum Index --> Basic Tax Questions --> Exempt Org Unrelated Bus. Incom


Discussion Forum Index --> Tax Questions --> Exempt Org Unrelated Bus. Incom

Ztom (talk|edits) said:

9 March 2011
I have read a lot of the articles in Tax Almanac but cant seem to find the answer I am looking for. I do the American Legion's taxes and bookkeeping. They have a bar. Is this unrelated business income? They also sell Lotto and have bingo. Are these Unrelated business income? Cant get exact info from IRS pubs. Thanks

Laketahoecpa (talk|edits) said:

9 March 2011
I do the return for an American Legion post also. The bar is not generally not UBI - under ยง501(c)(19) part of their exempt purpose is to provide "social and recreational activities for its members". The key is that the Legion has to require that nonmembers only use bar as guest of a member.

If it is open to general public some or all of the time then you will have an issue.

We don't have Lotto and bingo so can't help you there. IMO, the Lotto and bingo treatment would be same as bar (members and guests versus public).

CPAdavid (talk|edits) said:

10 March 2011
I agree with Laketahoecpa on all counts. Refer to:

1.501(c)(19)-1(c) and LTR 8539091 in which the IRS relies on Rev Rul 68-535 relating to social clubs in distinguishing activities that do not have a substantial causal relationship to permitted purposes.

Captcook (talk|edits) said:

10 March 2011
Also, make sure you are properly allocating overhead to each of these activities. You may find you have a loss regardless of whether they could be UBI or not.

Ztom (talk|edits) said:

10 March 2011
Thanks, the reason I asked the question is that IRS is requesting a 990t

CPAdavid (talk|edits) said:

10 March 2011
Ztom,

Has the organization been filing 990-T's in prior years? If so, that is probably why the IRS is asking for one. Whenever I take on a new client that has been filing 990-T, I always take a close look at what they are reporting as UBI. Sometimes I discover that it is not in fact UBI and should never have been reported as such. In that case, a letter of explanation to the IRS should suffice.

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