Kind, Inc., an exempt organization, leases land, a building, and factory equipment to Shirts, Inc. Shirts...
Kind, Inc., an exempt organization, leases land, a building, and factory equipment to Shirts, Inc. Shirts is a taxable entity that manufactures shirts for distribution through its factory outlet stores. The rent income and the related expenses for Kind are as follows:
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a. The amount of Kind's unrelated business income is $.
b. Assume instead that Kind's rent income and expenses are recorded as follows.
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The amount of Kind's unrelated business income is $.
Please answer a and b with explanation. Not sure if there would be a difference with the rent expenses. [Taxation 2019 Question] Thank You!
Homework Answers
(a)
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Land and building rent net income= 100000 - 40000 = $ 60000
Factory Equipment rent net income = 125000-25000 = $ 100000
Unrelated business income = 60000 + 100000 = $ 160000
As kind is exempt organization so rent is not an business activity done in normal course all these will be unrelated business income = $ 160000
| Rent Income | Rent Expenses | |||
| Land and building | $100,000 | $20,000 | ||
| Factory equipment | 125,000 | 50,000 | ||
(b)
Land and building rent net income= 100000 - 20000 = $ 80000
Factory Equipment rent net income = 125000-50000 = $ 75000
Unrelated business income = 80000 + 75000 = $ 155000
As kind is exempt organization so rent is not an business activity done in normal course all these will be unrelated business income = $ 155000
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