Write a letter to Clay Marshall explaining the reason for the tax consequences.
The Modern Art Museum is an exempt organization that operates a gift shop. The museum’s annual operations budget is $3.2 million. Gift shop sales generate a profit of $900,000. Another $600,000 of investment income is generated by the museum’s endowment fund.
Both the income from the gift shop and the endowment income are used to support the exempt purpose of the museum. The balance of $1.7 million required for annual operations is provided through admission fees.
Clay Marshall, a new board member, does not understand why the museum is subject to tax at all, particularly because all of the entity’s profits are used in carrying out the mission of the museum.
Calculate the amount of unrelated business income.
Assume, instead, that the endowment income is reinvested in the endowment fund, rather than being used to support annual operations. Calculate the amount of unrelated business income.
As the museum treasurer, write a letter to Clay Marshall explaining the reason for the tax consequences.
Submission Requirements
Your well-written answer should be three pages in length not including the required cover and references pages. Include an explanation of calculations.
Support your letter with at least four to six tax, scholarly, legislative, or court references
Format your answer according to APA
Reach out to your instructor if you have questions about the assignment.
Answer preview to write a letter to Clay Marshall explaining the reason for the tax consequences.
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