Regulatory Compliance & Law Flashcards
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Read the first 7 Regulatory Compliance & Law flashcards as text
A donor contributes a conservation easement on farmland to a land trust. Which IRC section governs the deductibility of this contribution?
Answer: IRC Section 170(h)
IRC Section 170(h) governs the deductibility of qualified conservation contributions, including easements, requiring the donation to be made to a qualified organization exclusively for conservation purposes.
Which of the following activities by a 501(c)(3) organization constitutes prohibited political campaign intervention under IRS rules?
Answer: Endorsing a specific candidate for public office
Endorsing a specific candidate for public office is absolutely prohibited for 501(c)(3) organizations under the political campaign intervention rules, which can result in loss of exemption.
What is the 'minimum distribution requirement' (MDR) for private foundations under IRC Section 4942?
Answer: 5% of the foundation's net assets must be distributed annually for charitable purposes
IRC Section 4942 requires private foundations to distribute at least 5% of the fair market value of their investment assets annually for charitable purposes or face an excise tax.
An advisor recommends that a client use a pooled income fund (PIF) for a charitable gift. Which of the following correctly describes a PIF?
Answer: A trust in which donors' gifts are commingled and donors receive a pro-rata share of actual income earned
A pooled income fund combines gifts from multiple donors into a single fund, with each donor receiving a proportionate share of the actual net income earned during their lifetime, after which the gift passes to charity.
Under state charitable solicitation registration laws, when must a nonprofit organization generally register before conducting fundraising activities?
Answer: Prior to soliciting contributions in each state where registration is required
Most states require charitable organizations to register before soliciting contributions within that state, regardless of the organization's incorporation state, though exemption thresholds vary.
A testator's will leaves $500,000 'to the local hospital to be used for cancer research.' The hospital later closes its cancer research program. Under the cy pres doctrine, what occurs?
Answer: A court may redirect the gift to another charitable purpose as close as possible to the original intent
The cy pres doctrine allows courts to modify the purpose of a charitable gift when the original purpose becomes impossible or impractical, redirecting funds to an as-similar-as-possible charitable purpose.
Which of the following correctly describes the 'excess business holdings' rules under IRC Section 4943 for private foundations?
Answer: A private foundation and its disqualified persons combined generally cannot own more than 20% of a business enterprise
IRC Section 4943 generally limits combined private foundation and disqualified person ownership of a business enterprise to 20% (35% if a third party has effective control), to prevent use of foundations to control commercial businesses.