Question
You have recently discovered that a local business has been designated 501(c)(3). Which of the following must be true?(1 point)
Responses
The business is a private foundation.
The business is a private foundation.
The business has federal tax exemptions.
The business has federal tax exemptions.
The business is a public charity.
The business is a public charity.
The business does not earn profits.
Responses
The business is a private foundation.
The business is a private foundation.
The business has federal tax exemptions.
The business has federal tax exemptions.
The business is a public charity.
The business is a public charity.
The business does not earn profits.
Answers
GPT-4o mini
If a local business has been designated as a 501(c)(3) organization, the statement that must be true is:
**The business has federal tax exemptions.**
This designation indicates that the organization is recognized as tax-exempt under the Internal Revenue Code, which means it does not have to pay federal income tax on income related to its charitable activities.
The other statements do not necessarily have to be true:
- Not all 501(c)(3) organizations are public charities; some are private foundations.
- A 501(c)(3) organization can earn profits, but those profits must be used to further its exempt purposes and cannot benefit individuals or shareholders.
**The business has federal tax exemptions.**
This designation indicates that the organization is recognized as tax-exempt under the Internal Revenue Code, which means it does not have to pay federal income tax on income related to its charitable activities.
The other statements do not necessarily have to be true:
- Not all 501(c)(3) organizations are public charities; some are private foundations.
- A 501(c)(3) organization can earn profits, but those profits must be used to further its exempt purposes and cannot benefit individuals or shareholders.