Question

Which of the following activities does NOT produce unrelated business income? *

All activities if the organization uses the income generated to further an exempt purpose.

Sale of "bingo" cards with scratch-off numbers. Winners have two weeks to claim their prize from the organization's headquarters.

Activities carried out by an unpaid workforce with only slight involvement by paid employees.

Sale of donated merchandise that was substantially improved by the organization

Answer 1

Ans is C Activities carried out by an unpaid workforce with only slight involvement by paid employees.

Explanation: an activity is called an unrelated business if it is in nature of trade or business generating income like for profit, must be regularly conducted, activity must not be substantially related to exempt purpose of non profit.

There is specific exclusion for UBI for the following items:

Donated merchandise, sale of donated merchandise, that is contributed, not substantially improved by organization

Volunteer work force, activity substantially carried on by unpaid workers that work voluntarily here most of the work is performed by volunteers that completes the substantial definition. So this is correct choice.

Sale of bingo cards is excluded but bingo having scratch no is not excluded from UBI so this is UBI.