1. Jan and Dean decided to form a charitable organization, I Love Rock N Rollers, to provide funding to assist former rock and roll group members who have become homeless. They are planning to hold a mini-Woodstock event to raise money, with music by groups from the 60s and 70s. The event will offer food and beverages, and the sale of memorabilia related to the event. Before they go any further, Jan and Dean need to: A. Prepare articles of incorporation and bylaws, obtain an EIN from the IRS if the organization will have employees, apply for permission to solicit charitable contributions and apply for 501(c)(3) status from the IRS. B. Prepare articles of incorporation and bylaws and file them with the state, obtain an EIN from the IRS if the organization will have employees, apply for permission to solicit charitable contributions and apply for 501(a) status from the IRS. C. Prepare articles of incorporation and bylaws and file them with the state, obtain an EIN from the IRS, apply for permission to solicit charitable contributions and apply for 501(c)(3) status from the IRS. D. Prepare articles of incorporation and bylaws, obtain an EIN from the IRS, apply for permission to solicit charitable contributions and apply for 501(a) status from the IRS. 2. When organizers and directors apply for not-for-profit status from a state they are subject to which of the following? A. Oversight, transparency and accountability for performance. B. Supervision, transparency, and profitability. C. Oversight, reliability, and transparency of performance. D. Responsibility for performance, accountability, and liability. 3. Approval from the IRS of 501(c)(3) status exempts an organization from which of the following? A. All taxes. B. Federal income taxes. C. Federal and state income taxes. D. Income taxes and sales taxes. 4. Under the IRC, public charities are allowed to conduct direct lobbying activity. What, if any, limit is placed on such lobbying? A. There is no limit provided no propaganda is distributed by the charity. B. There is no limit provided no individual or group contributes more than $500 to lobbying activity in any one year. C. There is no limit provided the lobbying activity directly affects the NFPs charitable purpose. D. There is a limit of up to $1,000,000 a year based on the size of the NFPs exempt program costs. 5. A not-for-profit organization that is exempt from federal income taxes under IRC Sec. 501(c)(3), exists to make grants to public charities, and receives its support from a small number of individuals or corporations and investment income rather than from the public at large is called a: A. Private foundation. B. Public charity. C. Nongovernmental organization. D. Public foundation. 6. An organization was formed solely to support the creation of a high-speed rail system between two major metropolitan areas. The organization will be offering voter education seminars to be sure that the public is educated about the benefits of the rail system before the proposal is presented to the legislature. Under what circumstances would the organization be able to maintain charitable tax-exempt status? A. Information in its brochures is strictly based on confirmable facts. B. The brochures provide information only about the benefits of the system, but do not directly attempt to persuade voters to vote for the system. C. The organization properly elects to make expenditures to influence legislation on Form 5768. D. The organization would not be eligible for charitable tax-exempt status. 7. Artists Unlimited was formed to support the local art community. Which of the following activities would be considered unrelated business income? A. Income from the sale of tee shirts that feature art reproductions by local artists, produced and sold by volunteers. B. Interest and dividend income from investments that were donated by a major retail company. C. Sponsorship of an event by an art supply company, whose name was prominently displayed at the event. D. Monthly rental fees for office space used by two small legal firms. The rental fees are used to make mortgage and interest payments on the Artists Unlimiteds building. 8. You are considering contributing to a local charity whose primary function is to provide after-school care for underprivileged children. However, you saw in the paper that the president of the organization just bought a house that is located in a very expensive gated community, and you are concerned that more money is going to the presidents salary than to the actual after-school care. Before you donate, you want to feel comfortable that this is not the case. Which of the following is a financial measurement that might help you in determining the amount of resources going to after-school care? A. Fund-raising efficiency B. Program effectiveness C. Fund-raising ratio D. Efficiency 9. The tool the IRS most likely will use when key officers in a tax-exempt entity receive excess economic benefits from transactions with the not-for-profit organization is: A. Fines and forfeits. B. Revocation of the organizations tax-exempt status. C. Intermediate sanctions. D. Public display of offenders on the IRSs Web site. 10. When a tax-exempt organization dissolves, the managers must ensure that: A. All assets are appropriately transferred to another tax-exempt organization. B. All creditors get paid. C. All federal, state, and local taxes are paid. D. All of the above.