Detailed Answer
(d) The requirement is to determine which one of the
listed activities will not result in unrelated business income. Unrelated
business income (UBI) is income derived from any trade
or business, the conduct of which is not substantially related to
the exercise or performance of an organization’s exempt purpose.
For a trade or business to be ’related,’ the conduct of the business
activity must have a causal relationship to the achievement
of the exempt purpose. A business activity will be ’substantially
related’ only if the causal relationship is a substantial one. Assuming
that the development and improvement of its members is
one of the purposes for which a trade association is granted an exemption,
the sale of publications used as course materials for the
association’s seminars for its members would be substantially
related.
Answer (a) is incorrect because even though a special rule
permits an exempt hospital to perform services at cost for other
hospitals with facilities to serve not more than 100 inpatients, the
permitted services are limited to data processing, purchasing,
warehousing, billing and collection, food, clinical, industrial engineering,
laboratory, printing, communications, record center,
and personnel services. Answer (b) is incorrect because even
though an exempt senior citizen’s center may operate a beauty
parlor and barber shop for its members, selling major appliances
to its members has been held to generate unrelated business income.
Answer (c) is incorrect because the performance of accounting
and tax services for its members would be unrelated to
the exempt purpose of a labor union.