What are the consequences if a not-for-profit earns a surplus or profit? Select one: a. It...
What are the consequences if a not-for-profit earns a surplus or profit?
Select one:
a. It must expend the surplus for the benefit of the organization and its clients.
b. It will necessarily be subject to corporate income taxes.
c. It may be subject to income taxes on particular profits not central to the primary tax-exempt income.
d. A and B.
e. A and C.
Homework Answers
The answer is option "e" - A and C.
Explanation: A not-for-profit can earn profit and the profit will not be taxed if it is used for its own operating expenses (including salaries for officers and staff) or for the benefit of the organization and its clients.
The not-for-profit will have to pay tax on that income or that profit that is not central to the primary tax exempt income. In other words any profit from "unrelated" business activities will be taxed.
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