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GiftLaw Pro Home   >  Chapter 7 - Charitable Organizations  >  7.1 Public Charities  >  7.1.4 Debt-Financed Income  >  Basic Quiz

Basic Quiz - 7.1.4 Debt-Financed Income

1. A percentage of income derived from debt-financed property, is subject to UBIT.
           
2. Debt-financed property is property held to produce income that was subject to acquisition indebtedness at anytime in the past.
           
3. A charity is created to preserve endangered wildflowers in Texas. The charity obtained a mortgage and purchased a plot of land where a particular breed of yellow rose grows. The acquisition indebtedness property is subject UBIT.
           
4. Acquisition indebtedness includes debts incurred to obtain property and to improve the property.
           
5. There are no "use" exceptions to the UBIT debt-financed property rules.
           
6. Debt-financed property, in which "substantially all" of the property is used for the charity's exempt purpose, is exempt from the UBIT rules.
           
7. IF a charity owns debt-financed property and uses the property for both charitable and non-charitable purposes, the property is considered debt-financed only to the non-charitable purposes.
           
8. Donna Donor leaves a qualified charity a piece of land in her will. The land has a mortgage of $20,000 attached to it. Upon receiving the property, the charity must pay UBIT on the income derived from the land.
           
9. A charity may not receive debt-encumbered property through a lifetime gift.
           
10. If a charity receives a lifetime gift of property on which debt was acquired three years ago, the property will not be considered debt-encumbered for the subsequent 10 years.