The Open Museum is an exempt organization that operates a gift shop. The museum's annual operations budget is $3,200,000. 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 gift shop and the endowment income are used to support the exempt purpose of the museum. The balance of $1,700,000 required for annual operations is provided through admission fees. Wayne Hsu, 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. Question Content Area a. Calculate the amount of unrelated business income. $fill in the blank b. Assume instead that the investment income is reinvested in the endowment fund, rather than used to support annual operations. The amount of the net unrelated business income is $fill in the blank . Question Content Area
The Open Museum is an exempt organization that operates a gift shop. The museum's annual operations budget is $3,200,000. 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 gift shop and the endowment income are used to support the exempt purpose of the museum. The balance of $1,700,000 required for annual operations is provided through admission fees.
Wayne Hsu, 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.
Question Content Area
a. Calculate the amount of unrelated business income.
$fill in the blank
b. Assume instead that the investment income is reinvested in the endowment fund, rather than used to support annual operations. The amount of the net unrelated business income is $fill in the blank .
Question Content Area
c. As the museum treasurer, complete the letter to Wayne explaining the reason for the these results.
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