Documentation & Reporting Flashcards
7 cards from real CAP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Documentation & Reporting flashcards as text
Which IRS schedule attached to Form 990 requires a public charity to explain its process for reviewing and approving executive compensation?
Answer: Schedule J
Schedule J requires organizations paying certain officers, directors, or key employees more than $150,000 to describe their compensation review process, including use of comparability data and independent approval.
A charitable remainder unitrust (CRUT) must value its assets annually. What is the primary documentation purpose of this annual valuation?
Answer: To determine the income beneficiary's taxable distribution amount for that year
Because a CRUT pays a fixed percentage of trust assets revalued annually, the annual asset valuation directly determines the distribution amount paid to the income beneficiary each year.
When a donor makes a non-cash contribution of intellectual property (e.g., a patent), what special reporting applies in subsequent years?
Answer: The charity must file Form 8899 to report qualified donee income from the IP, which may trigger additional deductions for the donor
Under IRC §170(m), when donated intellectual property generates income for the donee, the charity must file Form 8899 reporting that income, and the donor may claim additional charitable deductions based on a percentage of the donee income.
A nonprofit's gift acceptance policy should specifically address which documentation requirement for complex assets?
Answer: Environmental due diligence documentation for gifts of real estate
Gift acceptance policies for real estate should require environmental assessments (Phase I, and potentially Phase II) to document and manage the risk of accepting property with potential contamination liability.
Under IRS rules governing charitable remainder trusts, the unitrust or annuity payments to non-charitable beneficiaries are characterized using a four-tier income ordering system. What is the FIRST tier?
Answer: Ordinary income
CRT distributions follow a four-tier ordering: (1) ordinary income, (2) capital gains, (3) tax-exempt income, (4) return of corpus; ordinary income is distributed first, meaning the most highly taxed income flows to beneficiaries first.
Which type of organization is required to file Form 990-N (e-Postcard) rather than a full Form 990?
Answer: Public charities with gross receipts normally $50,000 or less
Small tax-exempt organizations whose annual gross receipts are normally $50,000 or less may satisfy their annual reporting requirement by filing the simple Form 990-N electronic postcard rather than a full Form 990.
A philanthropic advisor helps a client document a bargain sale of real estate to a charity. What TWO values must be established and documented?
Answer: The fair market value of the property and the actual sale price paid by the charity
In a bargain sale, the donor must document the fair market value (via qualified appraisal) and the actual sale price; the charitable deduction equals FMV minus the amount received, and the donor must recognize gain on the sale portion.