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GiftLaw Pro Home   >  Chapter 7 - Charitable Organizations  >  7.1 Public Charities  >  7.1.2 Intermediate Sanctions  >  Basic Quiz

Basic Quiz - 7.1.2 Intermediate Sanctions

1. A disqualified person is any person, or family member of a person, who at anytime in the last five years is in a position to exercise substantial influence over the public charity.
           
2. Before July 30, 1996, the only way to punish a charity for engaging in activities that were not primarily for a charitable purpose was to revoke the charity's tax-exempt status.
           
3. Intermediate sanctions take the form of a tax imposed on all of the charity's assets.
           
4. Below-market loans and unreasonable compensation to a disqualified person are both examples of "excess benefit transactions."
           
5. Charities can avoid excess benefit transactions when paying compensation to a disqualified person by taking advantage of the IRS "safe harbor" rules.
           
6. Compensation to a disqualified person will not automatically be treated as an excess benefit transaction if not documented by the board of directors.
           
7. Intermediate sanctions, in the form of excise taxes, may be imposed on a disqualified person who engages in an excess benefit transaction, but never upon managers of the public charity.
           
8. Excise tax is calculated based on the amount of the excess benefit.
           
9. The initial amount of the excise tax imposed on the disqualified person is 100% of the excess benefit.
           
10. If an intermediate sanction is imposed, it is not permissible to also revoke the charity's tax-exempt status.