For each of the following organizations, determine the amount of the UBIT.
a. AIDS, Inc., an exempt charitable organization that provides support for individuals with AIDS, operates a retail medical supply store open to the general public. The net income of the store, before any Federal income taxes, is $305,000.
b. The local Episcopal Church operates a retail gift shop. The inventory consists of the typical items sold by commercial gift shops in the city. The director of the gift shop estimates that 80% of the gift shop sales are to tourists and 20% are to church members. The net income of the gift shop, before the salaries of the three gift shop employees and any Federal income taxes, is $300,000. The salaries of the employees total $80,000.
c. Education, Inc., a private university, has vending machines in the student dormitories and academic buildings on campus. In recognition of recent tuition increases, the university has adopted a policy of merely trying to recover its costs associated with the vending machine activity, before any Federal income taxes, is $75,000.
d. Worn, Inc., an exempt organization, provides food for the homeless. It operates a thrift store that sells used clothing to the general public. The thrift shop is staffed by four salaried employees. All of the clothes it sells are received as contributions. The $100,000 profit generated for the year by the thrift shop is used in Worn's mission of providing food to the homeless.© BrainMass Inc. brainmass.com June 4, 2020, 1:27 am ad1c9bdddf
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Assuming the UBI is earned for 2010
UBIT = $22,250 + ($305,000 - $100,000)*39% = $102,200
The unrelated business income tax are examined.