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File federal and state taxes free online 28. File federal and state taxes free online   Miscellaneous Deductions Table of Contents What's New Introduction Useful Items - You may want to see: Deductions Subject to the 2% LimitUnreimbursed Employee Expenses (Line 21) Tax Preparation Fees (Line 22) Other Expenses (Line 23) Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses What's New Standard mileage rate. File federal and state taxes free online  The 2013 rate for business use of a vehicle is 56½ cents per mile. File federal and state taxes free online Introduction This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). File federal and state taxes free online You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. File federal and state taxes free online This chapter covers the following topics. File federal and state taxes free online Deductions subject to the 2% limit. File federal and state taxes free online Deductions not subject to the 2% limit. File federal and state taxes free online Expenses you cannot deduct. File federal and state taxes free online You must keep records to verify your deductions. File federal and state taxes free online You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. File federal and state taxes free online For more information on recordkeeping, get Publication 552, Record- keeping for Individuals. File federal and state taxes free online Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). File federal and state taxes free online You can claim the amount of expenses that is more than 2% of your adjusted gross income. File federal and state taxes free online You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. File federal and state taxes free online Your adjusted gross income is the amount on Form 1040, line 38. File federal and state taxes free online Generally, you apply the 2% limit after you apply any other deduction limit. File federal and state taxes free online For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in chapter 26) before you apply the 2% limit. File federal and state taxes free online Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form 1040). File federal and state taxes free online Unreimbursed employee expenses (line 21). File federal and state taxes free online Tax preparation fees (line 22). File federal and state taxes free online Other expenses (line 23). File federal and state taxes free online Unreimbursed Employee Expenses (Line 21) Generally, you can deduct on Schedule A (Form 1040), line 21, unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. File federal and state taxes free online An expense is ordinary if it is common and accepted in your trade, business, or profession. File federal and state taxes free online An expense is necessary if it is appropriate and helpful to your business. File federal and state taxes free online An expense does not have to be required to be considered necessary. File federal and state taxes free online Examples of unreimbursed employee expenses are listed next. File federal and state taxes free online The list is followed by discussions of additional unreimbursed employee expenses. File federal and state taxes free online Business bad debt of an employee. File federal and state taxes free online Education that is work related. File federal and state taxes free online (See chapter 27. File federal and state taxes free online ) Legal fees related to your job. File federal and state taxes free online Licenses and regulatory fees. File federal and state taxes free online Malpractice insurance premiums. File federal and state taxes free online Medical examinations required by an employer. File federal and state taxes free online Occupational taxes. File federal and state taxes free online Passport for a business trip. File federal and state taxes free online Subscriptions to professional journals and trade magazines related to your work. File federal and state taxes free online Travel, transportation, entertainment, and gifts related to your work. File federal and state taxes free online (See chapter 26. File federal and state taxes free online ) Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. File federal and state taxes free online Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer. File federal and state taxes free online Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. File federal and state taxes free online For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer, see Publication 529. File federal and state taxes free online Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. File federal and state taxes free online Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. File federal and state taxes free online Lobbying and political activities. File federal and state taxes free online   You may not be able to deduct that part of your dues that is for certain lobbying and political activities. File federal and state taxes free online See Dues used for lobbying under Nondeductible Expenses, later. File federal and state taxes free online Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. File federal and state taxes free online If you file Form 1040A, you can deduct these expenses on line 16. File federal and state taxes free online If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. File federal and state taxes free online However, neither spouse can deduct more than $250 of his or her qualified expenses. File federal and state taxes free online Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. File federal and state taxes free online You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. File federal and state taxes free online The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. File federal and state taxes free online See Publication 587 for more detailed information and a worksheet. File federal and state taxes free online Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. File federal and state taxes free online You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. File federal and state taxes free online Employment and outplacement agency fees. File federal and state taxes free online   You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. File federal and state taxes free online Employer pays you back. File federal and state taxes free online   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. File federal and state taxes free online (See Recoveries in chapter 12. File federal and state taxes free online ) Employer pays the employment agency. File federal and state taxes free online   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. File federal and state taxes free online Résumé. File federal and state taxes free online   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. File federal and state taxes free online Travel and transportation expenses. File federal and state taxes free online   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. File federal and state taxes free online You can deduct the travel expenses if the trip is primarily to look for a new job. File federal and state taxes free online The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. File federal and state taxes free online   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. File federal and state taxes free online   You can choose to use the standard mileage rate to figure your car expenses. File federal and state taxes free online The 2013 rate for business use of a vehicle is 56½ cents per mile. File federal and state taxes free online See chapter 26 for more information. File federal and state taxes free online Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. File federal and state taxes free online Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. File federal and state taxes free online If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. File federal and state taxes free online Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. File federal and state taxes free online If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. File federal and state taxes free online Research Expenses of a College Professor If you are a college professor, you can deduct research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. File federal and state taxes free online You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. File federal and state taxes free online However, you cannot deduct the cost of travel as a form of education. File federal and state taxes free online Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. File federal and state taxes free online You can depreciate the cost of tools that have a useful life substantially beyond the tax year. File federal and state taxes free online For more information about depreciation, see Publication 946. File federal and state taxes free online Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. File federal and state taxes free online You can also deduct assessments for benefit payments to unemployed union members. File federal and state taxes free online However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. File federal and state taxes free online Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions. File federal and state taxes free online You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. File federal and state taxes free online See Lobbying Expenses under Nondeductible Expenses, later. File federal and state taxes free online Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. File federal and state taxes free online You must wear them as a condition of your employment. File federal and state taxes free online The clothes are not suitable for everyday wear. File federal and state taxes free online It is not enough that you wear distinctive clothing. File federal and state taxes free online The clothing must be specifically required by your employer. File federal and state taxes free online Nor is it enough that you do not, in fact, wear your work clothes away from work. File federal and state taxes free online The clothing must not be suitable for taking the place of your regular clothing. File federal and state taxes free online Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. File federal and state taxes free online ). File federal and state taxes free online Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. File federal and state taxes free online However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. File federal and state taxes free online Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. File federal and state taxes free online Protective clothing. File federal and state taxes free online   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. File federal and state taxes free online   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. File federal and state taxes free online Military uniforms. File federal and state taxes free online   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. File federal and state taxes free online However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. File federal and state taxes free online In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. File federal and state taxes free online   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. File federal and state taxes free online   You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. File federal and state taxes free online Tax Preparation Fees (Line 22) You can usually deduct tax preparation fees in the year you pay them. File federal and state taxes free online Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. File federal and state taxes free online These fees include the cost of tax preparation software programs and tax publications. File federal and state taxes free online They also include any fee you paid for electronic filing of your return. File federal and state taxes free online Other Expenses (Line 23) You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. File federal and state taxes free online On Schedule A (Form 1040), line 23, you can deduct expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. File federal and state taxes free online You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes. File federal and state taxes free online Some of these other expenses are explained in the following discussions. File federal and state taxes free online If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses , later, under Nondeductible Expenses. File federal and state taxes free online Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. File federal and state taxes free online Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. File federal and state taxes free online First report the loss in Section B of Form 4684, Casualties and Thefts. File federal and state taxes free online You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. File federal and state taxes free online To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. File federal and state taxes free online For other casualty and theft losses, see chapter 25. File federal and state taxes free online Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. File federal and state taxes free online Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. File federal and state taxes free online The fees are deductible in the year paid. File federal and state taxes free online Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). File federal and state taxes free online You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. File federal and state taxes free online But if you work as an employee and also use the computer in that work, see Publication 946. File federal and state taxes free online Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. File federal and state taxes free online Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. File federal and state taxes free online The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. File federal and state taxes free online For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. File federal and state taxes free online Fees to Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. File federal and state taxes free online But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. File federal and state taxes free online You must add the fee to the cost of the property. File federal and state taxes free online You cannot deduct the fee you pay to a broker to sell securities. File federal and state taxes free online You can use the fee only to figure gain or loss from the sale. File federal and state taxes free online See the Instructions for Form 8949 for information on how to report the fee. File federal and state taxes free online Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. File federal and state taxes free online A hobby is not a business because it is not carried on to make a profit. File federal and state taxes free online See Activity not for profit in chapter 12 under Other Income. File federal and state taxes free online Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. File federal and state taxes free online Deductions of pass-through entities are passed through to the partners or shareholders. File federal and state taxes free online The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. File federal and state taxes free online Example. File federal and state taxes free online You are a member of an investment club that is formed solely to invest in securities. File federal and state taxes free online The club is treated as a partnership. File federal and state taxes free online The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. File federal and state taxes free online In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. File federal and state taxes free online However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. File federal and state taxes free online Publicly offered mutual funds. File federal and state taxes free online   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. File federal and state taxes free online A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. File federal and state taxes free online   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). File federal and state taxes free online This net figure is the amount you report on your return as income. File federal and state taxes free online You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. File federal and state taxes free online Information returns. File federal and state taxes free online   You should receive information returns from pass-through entities. File federal and state taxes free online Partnerships and S corporations. File federal and state taxes free online   These entities issue Schedule K-1, which lists the items and amounts you must report and identifies the tax return schedules and lines to use. File federal and state taxes free online Nonpublicly offered mutual funds. File federal and state taxes free online   These funds will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing your share of gross income and investment expenses. File federal and state taxes free online You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. File federal and state taxes free online Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. File federal and state taxes free online Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. File federal and state taxes free online You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. File federal and state taxes free online You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F), on the appropriate schedule. File federal and state taxes free online You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). File federal and state taxes free online See Tax Preparation Fees , earlier. File federal and state taxes free online Loss on Deposits For information on whether, and if so, how, you may deduct a loss on your deposit in a qualified financial institution, see Loss on Deposits in chapter 25. File federal and state taxes free online Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. File federal and state taxes free online If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. File federal and state taxes free online If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. File federal and state taxes free online Repayments of Social Security Benefits For information on how to deduct your repayments of certain social security benefits, see Repayments More Than Gross Benefits in chapter 11. File federal and state taxes free online Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. File federal and state taxes free online You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. File federal and state taxes free online Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. File federal and state taxes free online These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. File federal and state taxes free online Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. File federal and state taxes free online For more information about IRAs, see chapter 17. File federal and state taxes free online Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. File federal and state taxes free online They are not subject to the 2% limit. File federal and state taxes free online Report these items on Schedule A (Form 1040), line 28. File federal and state taxes free online List of Deductions Each of the following items is discussed in detail after the list (except where indicated). File federal and state taxes free online Amortizable premium on taxable bonds. File federal and state taxes free online Casualty and theft losses from income- producing property. File federal and state taxes free online Federal estate tax on income in respect of a decedent. File federal and state taxes free online Gambling losses up to the amount of gambling winnings. File federal and state taxes free online Impairment-related work expenses of persons with disabilities. File federal and state taxes free online Loss from other activities from Schedule K-1 (Form 1065-B), box 2. File federal and state taxes free online Losses from Ponzi-type investment schemes. File federal and state taxes free online See Losses from Ponzi-type investment schemes under Theft in chapter 25. File federal and state taxes free online Repayments of more than $3,000 under a claim of right. File federal and state taxes free online Unrecovered investment in an annuity. File federal and state taxes free online Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. File federal and state taxes free online You can elect to amortize the premium on taxable bonds. File federal and state taxes free online The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. File federal and state taxes free online Part of the premium on some bonds may be a miscellaneous deduction not subject to the 2% limit. File federal and state taxes free online For more information, see Amortizable Premium on Taxable Bonds in Publication 529, and Bond Premium Amortization in chapter 3 of Publication 550, Investment Income and Expenses. File federal and state taxes free online Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). File federal and state taxes free online First, report the loss in Form 4684, Section B. File federal and state taxes free online You may also have to include the loss on Form 4797, Sales of Business Property if you are otherwise required to file that form. File federal and state taxes free online To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. File federal and state taxes free online For more information on casualty and theft losses, see chapter 25. File federal and state taxes free online Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. File federal and state taxes free online Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. File federal and state taxes free online See Publication 559 for more information. File federal and state taxes free online Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. File federal and state taxes free online You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. File federal and state taxes free online You cannot deduct gambling losses that are more than your winnings. File federal and state taxes free online You cannot reduce your gambling winnings by your gambling losses and report the difference. File federal and state taxes free online You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. File federal and state taxes free online Therefore, your records should show your winnings separately from your losses. File federal and state taxes free online Diary of winnings and losses. File federal and state taxes free online You must keep an accurate diary or similar record of your losses and winnings. File federal and state taxes free online Your diary should contain at least the following information. File federal and state taxes free online The date and type of your specific wager or wagering activity. File federal and state taxes free online The name and address or location of the gambling establishment. File federal and state taxes free online The names of other persons present with you at the gambling establishment. File federal and state taxes free online The amount(s) you won or lost. File federal and state taxes free online See Publication 529 for more information. File federal and state taxes free online Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. File federal and state taxes free online Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and for other expenses in connection with your place of work that are necessary for you to be able to work. File federal and state taxes free online Self-employed. File federal and state taxes free online   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. File federal and state taxes free online Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28. File federal and state taxes free online It is not subject to the passive activity limitations. File federal and state taxes free online Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid or take a credit against your tax. File federal and state taxes free online See Repayments in chapter 12 for more information. File federal and state taxes free online Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. File federal and state taxes free online If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. File federal and state taxes free online See chapter 10 for more information about the tax treatment of pensions and annuities. File federal and state taxes free online Nondeductible Expenses Examples of nondeductible expenses are listed next. File federal and state taxes free online The list is followed by discussions of additional nondeductible expenses. File federal and state taxes free online List of Nondeductible Expenses Broker's commissions that you paid in connection with your IRA or other investment property. File federal and state taxes free online Burial or funeral expenses, including the cost of a cemetery lot. File federal and state taxes free online Capital expenses. File federal and state taxes free online Fees and licenses, such as car licenses, marriage licenses, and dog tags. File federal and state taxes free online Hobby losses, but see Hobby Expenses , earlier. File federal and state taxes free online Home repairs, insurance, and rent. File federal and state taxes free online Illegal bribes and kickbacks. File federal and state taxes free online See Bribes and kickbacks in chapter 11 of Publication 535. File federal and state taxes free online Losses from the sale of your home, furniture, personal car, etc. File federal and state taxes free online Personal disability insurance premiums. File federal and state taxes free online Personal, living, or family expenses. File federal and state taxes free online The value of wages never received or lost vacation time. File federal and state taxes free online Adoption Expenses You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses. File federal and state taxes free online See chapter 37. File federal and state taxes free online Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. File federal and state taxes free online These include qualification and registration fees for primary elections. File federal and state taxes free online Legal fees. File federal and state taxes free online   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. File federal and state taxes free online Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. File federal and state taxes free online Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. File federal and state taxes free online This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. File federal and state taxes free online You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. File federal and state taxes free online Dues paid to airline, hotel, and luncheon clubs are not deductible. File federal and state taxes free online Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). File federal and state taxes free online If you haul tools, instruments, or other items, in your car to and from work, you can deduct only the additional cost of hauling the items such as the rent on a trailer to carry the items. File federal and state taxes free online Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. File federal and state taxes free online This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). File federal and state taxes free online Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. File federal and state taxes free online Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. File federal and state taxes free online Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. File federal and state taxes free online However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. File federal and state taxes free online See Home Office under Unreimbursed Employee Expenses, earlier, and Security System under Deducting Expenses in Publication 587. File federal and state taxes free online Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. File federal and state taxes free online Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. File federal and state taxes free online You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. File federal and state taxes free online See chapter 18 for information on alimony. File federal and state taxes free online Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. File federal and state taxes free online These include expenses to: Influence legislation, Participate or intervene in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. File federal and state taxes free online Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. File federal and state taxes free online Dues used for lobbying. File federal and state taxes free online   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. File federal and state taxes free online See Lobbying Expenses in Publication 529 for information on exceptions. File federal and state taxes free online Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. File federal and state taxes free online However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. File federal and state taxes free online See chapter 25. File federal and state taxes free online Example. File federal and state taxes free online A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. File federal and state taxes free online The diamond falls from the ring and is never found. File federal and state taxes free online The loss of the diamond is a casualty. File federal and state taxes free online Lunches with Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. File federal and state taxes free online See chapter 26 for information on deductible expenses while traveling away from home. File federal and state taxes free online Meals While Working Late You cannot deduct the cost of meals while working late. File federal and state taxes free online However, you may be able to claim a deduction if the cost of meals is a deductible entertainment expense, or if you are traveling away from home. File federal and state taxes free online See chapter 26 for information on deductible entertainment expenses and expenses while traveling away from home. File federal and state taxes free online Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. File federal and state taxes free online Custody of children. File federal and state taxes free online Breach of promise to marry suit. File federal and state taxes free online Civil or criminal charges resulting from a personal relationship. File federal and state taxes free online Damages for personal injury, except for certain unlawful discrimination and whistleblower claims. File federal and state taxes free online Preparation of a title (or defense or perfection of a title). File federal and state taxes free online Preparation of a will. File federal and state taxes free online Property claims or property settlement in a divorce. File federal and state taxes free online You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. File federal and state taxes free online Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. File federal and state taxes free online Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. File federal and state taxes free online Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. File federal and state taxes free online Accounting certificate fees paid for the initial right to practice accounting. File federal and state taxes free online Bar exam fees and incidental expenses in securing initial admission to the bar. File federal and state taxes free online Medical and dental license fees paid to get initial licensing. File federal and state taxes free online Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. File federal and state taxes free online Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. File federal and state taxes free online Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. File federal and state taxes free online Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. File federal and state taxes free online You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. File federal and state taxes free online Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. File federal and state taxes free online You cannot deduct interest on a debt incurred or continued to buy or carry  tax-exempt securities. File federal and state taxes free online If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct. File federal and state taxes free online Example. File federal and state taxes free online During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. File federal and state taxes free online In earning this income, you had total expenses of $500 during the year. File federal and state taxes free online You cannot identify the amount of each expense item that is for each income item. File federal and state taxes free online Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. File federal and state taxes free online You can deduct, subject to the 2% limit, expenses of $400 (80% of $500). File federal and state taxes free online Travel Expenses for Another Individual You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business or personal travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. File federal and state taxes free online See chapter 26 for more information on deductible travel expenses. File federal and state taxes free online Voluntary Unemployment Benefit Fund Contributions You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. File federal and state taxes free online However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions. File federal and state taxes free online Wristwatches You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties. File federal and state taxes free online Prev  Up  Next   Home   More Online Publications
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File federal and state taxes free online 3. File federal and state taxes free online   Unrelated Trade or Business Table of Contents Selling of products of exempt functions. File federal and state taxes free online Dual use of assets or facilities. File federal and state taxes free online Exploitation of exempt functions. File federal and state taxes free online ExamplesExceptions. File federal and state taxes free online Excluded Trade or Business ActivitiesQualified sponsorship payment. File federal and state taxes free online Advertising. File federal and state taxes free online Exception for contingent payments. File federal and state taxes free online Exception for periodicals. File federal and state taxes free online Exception for conventions and trade shows. File federal and state taxes free online Legal definition. File federal and state taxes free online Legal where played. File federal and state taxes free online No for-profit games where played. File federal and state taxes free online Unrelated business income. File federal and state taxes free online   Unrelated business income is the income from a trade or business regularly conducted by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that the organization uses the profits derived from this activity. File federal and state taxes free online   Certain trade or business activities are not treated as an unrelated trade or business. File federal and state taxes free online See Excluded Trade or Business Activities, later. File federal and state taxes free online Trade or business. File federal and state taxes free online   The term “trade or business” generally includes any activity conducted for the production of income from selling goods or performing services. File federal and state taxes free online An activity does not lose its identity as a trade or business merely because it is conducted within a larger group of similar activities that may or may not be related to the exempt purposes of the organization. File federal and state taxes free online   For example, the regular sale of pharmaceutical supplies to the general public by a hospital pharmacy does not lose its identity as a trade or business, even though the pharmacy also furnishes supplies to the hospital and patients of the hospital in accordance with its exempt purpose. File federal and state taxes free online Similarly, soliciting, selling, and publishing commercial advertising is a trade or business even though the advertising is published in an exempt organization's periodical that contains editorial matter related to the organization's exempt purpose. File federal and state taxes free online Regularly conducted. File federal and state taxes free online   Business activities of an exempt organization ordinarily are considered regularly conducted if they show a frequency and continuity, and are pursued in a manner similar to comparable commercial activities of nonexempt organizations. File federal and state taxes free online   For example, a hospital auxiliary's operation of a sandwich stand for 2 weeks at a state fair would not be the regular conduct of a trade or business. File federal and state taxes free online The stand would not compete with similar facilities that a nonexempt organization would ordinarily operate year-round. File federal and state taxes free online However, operating a commercial parking lot every Saturday, year-round, would be the regular conduct of a trade or business. File federal and state taxes free online Not substantially related. File federal and state taxes free online    A business activity is not substantially related to an organization's exempt purpose if it does not contribute importantly to accomplishing that purpose (other than through the production of funds). File federal and state taxes free online Whether an activity contributes importantly depends in each case on the facts involved. File federal and state taxes free online   In determining whether activities contribute importantly to the accomplishment of an exempt purpose, the size and extent of the activities involved must be considered in relation to the nature and extent of the exempt function that they intend to serve. File federal and state taxes free online For example, to the extent an activity is conducted on a scale larger than is reasonably necessary to perform an exempt purpose, it does not contribute importantly to the accomplishment of the exempt purpose. File federal and state taxes free online The part of the activity that is more than needed to accomplish the exempt purpose is an unrelated trade or business. File federal and state taxes free online   Also in determining whether activities contribute importantly to the accomplishment of an exempt purpose, the following principles apply. File federal and state taxes free online Selling of products of exempt functions. File federal and state taxes free online   Ordinarily, selling products that result from the performance of exempt functions is not an unrelated trade or business if the product is sold in substantially the same state it is in when the exempt functions are completed. File federal and state taxes free online Thus, for an exempt organization engaged in rehabilitating handicapped persons (its exempt function), selling articles made by these persons as part of their rehabilitation training is not an unrelated trade or business. File federal and state taxes free online   However, if a completed product resulting from an exempt function is used or exploited in further business activity beyond what is reasonably appropriate or necessary to dispose of it as is, the activity is an unrelated trade or business. File federal and state taxes free online For example, if an exempt organization maintains an experimental dairy herd for scientific purposes, the sale of milk and cream produced in the ordinary course of operation of the project is not an unrelated trade or business. File federal and state taxes free online But if the organization uses the milk and cream in the further manufacture of food items such as ice cream, pastries, etc. File federal and state taxes free online , the sale of these products is an unrelated trade or business unless the manufacturing activities themselves contribute importantly to the accomplishment of an exempt purpose of the organization. File federal and state taxes free online Dual use of assets or facilities. File federal and state taxes free online   If an asset or facility necessary to the conduct of exempt functions is also used in commercial activities, its use for exempt functions does not, by itself, make the commercial activities a related trade or business. File federal and state taxes free online The test, as discussed earlier, is whether the activities contribute importantly to the accomplishment of exempt purposes. File federal and state taxes free online   For example, a museum has a theater auditorium designed for showing educational films in connection with its program of public education in the arts and sciences. File federal and state taxes free online The theater is a principal feature of the museum and operates continuously while the museum is open to the public. File federal and state taxes free online If the organization also operates the theater as a motion picture theater for the public when the museum is closed, the activity is an unrelated trade or business. File federal and state taxes free online   For information on allocating expenses for the dual use of assets or facilities, see Deductions in chapter 4. File federal and state taxes free online Exploitation of exempt functions. File federal and state taxes free online   Exempt activities sometimes create goodwill or other intangibles that can be exploited in a commercial way. File federal and state taxes free online When an organization exploits such an intangible in commercial activities, the fact that the income depends in part upon an exempt function of the organization does not make the commercial activities a related trade or business. File federal and state taxes free online Unless the commercial exploitation contributes importantly to the accomplishment of the exempt purpose, the commercial activities are an unrelated trade or business. File federal and state taxes free online   For the treatment of expenses attributable to the exploitation of exempt activities, see Deductions in chapter 4. File federal and state taxes free online Examples The following are examples of activities that were determined to be (or not to be) unrelated trades or businesses using the definitions and principles just discussed. File federal and state taxes free online Sales commissions. File federal and state taxes free online   An agricultural organization, whose exempt purposes are to promote better conditions for cattle breeders and to improve the breed generally, engages in an unrelated trade or business when it regularly sells cattle for its members on a commission basis. File federal and state taxes free online Artists' facilities. File federal and state taxes free online   An organization whose exempt purpose is to stimulate and foster public interest in the fine arts by promoting art exhibits, sponsoring cultural events, and furnishing information about fine arts leases studio apartments to artist tenants and operates a dining hall primarily for these tenants. File federal and state taxes free online These two activities do not contribute importantly to accomplishing the organization's exempt purpose. File federal and state taxes free online Therefore, they are unrelated trades or businesses. File federal and state taxes free online Membership list sales. File federal and state taxes free online   An exempt educational organization regularly sells membership mailing lists to business firms. File federal and state taxes free online This activity does not contribute importantly to the accomplishment of the organization's exempt purpose and therefore is an unrelated trade or business. File federal and state taxes free online Also see Exchange or rental of member lists under Excluded Trade or Business Activities, later. File federal and state taxes free online Hospital facilities. File federal and state taxes free online   An exempt hospital leases its adjacent office building and furnishes certain office services to a hospital-based medical group for a fee. File federal and state taxes free online The group provides all diagnostic and therapeutic procedures to the hospital's patients and operates the hospital's emergency room on a 24-hour basis. File federal and state taxes free online The leasing activity is substantially related to the hospital's exempt purpose and is not an unrelated trade or business. File federal and state taxes free online   The hospital also operates a gift shop patronized by patients, visitors making purchases for patients, and employees; a cafeteria and coffee shop primarily for employees and medical staff; and a parking lot for patients and visitors only. File federal and state taxes free online These activities are also substantially related to the hospital's exempt purpose and do not constitute unrelated trades or businesses. File federal and state taxes free online Book publishing. File federal and state taxes free online   An exempt organization engages primarily in activities that further its exempt purposes. File federal and state taxes free online It also owns the publication rights to a book that does not relate to any of its exempt purposes. File federal and state taxes free online The organization exploits the book in a commercial manner by arranging for printing, distribution, publicity, and advertising in connection with the sale of the book. File federal and state taxes free online These activities constitute a trade or business regularly conducted. File federal and state taxes free online Because exploiting the book is unrelated to the organization's exempt purposes (except for the use of the book's profits), the income is unrelated business income. File federal and state taxes free online   However, if the organization transfers publication rights to a commercial publisher in return for royalties, the royalty income received will not be unrelated business income. File federal and state taxes free online See Royalties under Exclusions in chapter 4. File federal and state taxes free online School handicraft shop. File federal and state taxes free online   An exempt vocational school operates a handicraft shop that sells articles made by students in their regular courses of instruction. File federal and state taxes free online The students are paid a percentage of the sales price. File federal and state taxes free online In addition, the shop sells products made by local residents who make articles at home according to the shop's specifications. File federal and state taxes free online The shop manager periodically inspects the articles during their manufacture to ensure that they meet desired standards of style and quality. File federal and state taxes free online Although many local participants are former students of the school, any qualified person may participate in the program. File federal and state taxes free online The sale of articles made by students does not constitute an unrelated trade or business, but the sale of products made by local residents is an unrelated trade or business and is subject to unrelated business income tax. File federal and state taxes free online School facilities. File federal and state taxes free online   An exempt school has tennis courts and dressing rooms that it uses during the regular school year in its educational program. File federal and state taxes free online During the summer, the school operates a tennis club open to the general public. File federal and state taxes free online Employees of the school run the club, including collecting membership fees and scheduling court time. File federal and state taxes free online   Another exempt school leases the same type of facilities to an unrelated individual who runs a tennis club for the summer. File federal and state taxes free online The lease is for a fixed fee that does not depend on the income or profits derived from the leased property. File federal and state taxes free online   In both situations, the exempt purpose is the advancement of education. File federal and state taxes free online Furnishing tennis facilities in the manner described does not further that exempt purpose. File federal and state taxes free online These activities are unrelated trades or businesses. File federal and state taxes free online However, in the second situation the income derived from the leasing of the property is excluded from unrelated business taxable income as rent from real property. File federal and state taxes free online See Rents under Exclusions in chapter 4. File federal and state taxes free online Services provided with lease. File federal and state taxes free online   An exempt university leases its football stadium during several months of the year to a professional football team for a fixed fee. File federal and state taxes free online Under the lease agreement, the university furnishes heat, light, and water and is responsible for all ground maintenance. File federal and state taxes free online It also provides dressing room, linen, and stadium security services for the professional team. File federal and state taxes free online   Leasing of the stadium is an unrelated trade or business. File federal and state taxes free online In addition, the substantial services furnished for the convenience of the lessee go beyond those usually provided with the rental of space for occupancy only. File federal and state taxes free online Therefore, the income from this lease is rent from real property and unrelated business taxable income. File federal and state taxes free online Broadcasting rights. File federal and state taxes free online   An exempt collegiate athletic conference conducts an annual competitive athletic game between its conference champion and another collegiate team. File federal and state taxes free online Income is derived from admission charges and the sale of exclusive broadcasting rights to a national radio and television network. File federal and state taxes free online An athletic program is considered an integral part of the educational process of a university. File federal and state taxes free online   The educational purposes served by intercollegiate athletics are identical whether conducted directly by individual universities or by their regional athletic conference. File federal and state taxes free online Also, the educational purposes served by exhibiting a game before an audience that is physically present and exhibiting the game on television or radio before a much larger audience are substantially similar. File federal and state taxes free online Therefore, the sale of the broadcasting rights contributes importantly to the accomplishment of the organization's exempt purpose and is not an unrelated trade or business. File federal and state taxes free online   In a similar situation, an exempt organization was created as a national governing body for amateur athletes to foster interest in amateur sports and to encourage widespread public participation. File federal and state taxes free online The organization receives income each year from the sale of exclusive broadcasting rights to an independent producer, who contracts with a commercial network to broadcast many of the athletic events sponsored, supervised, and regulated by the organization. File federal and state taxes free online   The broadcasting of these events promotes the various amateur sports, fosters widespread public interest in the benefits of the organization's nationwide amateur program, and encourages public participation. File federal and state taxes free online The sale of the rights and the broadcasting of the events contribute importantly to the organization's exempt purpose. File federal and state taxes free online Therefore, the sale of the exclusive broadcasting rights is not an unrelated trade or business. File federal and state taxes free online Yearbook advertising. File federal and state taxes free online   An exempt organization receives income from the sale of advertising in its annual yearbook. File federal and state taxes free online The organization hires an independent commercial firm, under a contract covering a full calendar year, to conduct an intensive advertising solicitation campaign in the organization's name. File federal and state taxes free online This firm is paid a percentage of the gross advertising receipts for selling the advertising, collecting from advertisers, and printing the yearbook. File federal and state taxes free online This advertising activity is an unrelated trade or business. File federal and state taxes free online Pet boarding and grooming services. File federal and state taxes free online   An exempt organization, organized and operated for the prevention of cruelty to animals, receives unrelated business income from providing pet boarding and grooming services for the general public. File federal and state taxes free online These activities do not contribute importantly to its purpose of preventing cruelty to animals. File federal and state taxes free online Museum eating facilities. File federal and state taxes free online   An exempt art museum operates a dining room, a cafeteria, and a snack bar for use by the museum staff, employees, and visitors. File federal and state taxes free online Eating facilities in the museum help to attract visitors and allow them to spend more time viewing the museum's exhibits without having to seek outside restaurants at mealtime. File federal and state taxes free online The eating facilities also allow the museum staff and employees to remain in the museum throughout the day. File federal and state taxes free online Thus, the museum's operation of the eating facilities contributes importantly to the accomplishment of its exempt purposes and is not unrelated trade or business. File federal and state taxes free online Halfway house workshop. File federal and state taxes free online   A halfway house organized to provide room, board, therapy, and counseling for persons discharged from alcoholic treatment centers also operates a furniture shop to provide full-time employment for its residents. File federal and state taxes free online The profits are applied to the operating costs of the halfway house. File federal and state taxes free online The income from this venture is not unrelated trade or business income because the furniture shop contributes importantly to the organization's purpose of aiding its residents' transition from treatment to a normal and productive life. File federal and state taxes free online Travel tour programs. File federal and state taxes free online   Travel tour activities that are a trade or business are an unrelated trade or business if the activities are not substantially related to the purpose for which tax exemption was granted to the organization. File federal and state taxes free online Example 1. File federal and state taxes free online A tax-exempt university alumni association provides a travel tour program for its members and their families. File federal and state taxes free online The organization works with various travel agencies and schedules approximately ten tours a year to various places around the world. File federal and state taxes free online It mails out promotional material and accepts reservations for fees paid by the travel agencies on a per-person basis. File federal and state taxes free online The organization provides an employee for each tour as a tour leader. File federal and state taxes free online There is no formal educational program conducted with these tours, and they do not differ from regular commercially operated tours. File federal and state taxes free online By providing travel tours to its members, the organization is engaging in a regularly conducted trade or business. File federal and state taxes free online Even if the tours it offers support the university, financially and otherwise, and encourage alumni to do the same, they do not contribute importantly to the organization's exempt purpose of promoting education. File federal and state taxes free online Therefore, the sale of the travel tours is an unrelated trade or business. File federal and state taxes free online Example 2. File federal and state taxes free online A tax-exempt organization formed for the purpose of educating individuals about the geography and the culture of the United States provides study tours to national parks and other locations within the United States. File federal and state taxes free online These tours are conducted by teachers and others certified by the state board of education. File federal and state taxes free online The tours are primarily designed for students enrolled in degree programs at state educational institutions but are open to all who agree to participate in the required study program associated with the tour taken. File federal and state taxes free online A tour's study program consists of instruction on subjects related to the location being visited on the tour. File federal and state taxes free online Each tour group brings along a library of material related to the subjects being studied on the tour. File federal and state taxes free online During the tour, 5 or 6 hours per day are devoted to organized study, preparation of reports, lectures, instruction, and recitation by the students. File federal and state taxes free online Examinations are given at the end of each tour. File federal and state taxes free online The state board of education awards academic credit for tour participation. File federal and state taxes free online Because these tours are substantially related to the organization's exempt purpose, they are not an unrelated trade or business. File federal and state taxes free online Insurance programs. File federal and state taxes free online   An organization that acts as a group insurance policyholder for its members and collects a fee for performing administrative services is normally carrying on an unrelated trade or business. File federal and state taxes free online Exceptions. File federal and state taxes free online   Organizations whose exempt activities may include the provision of insurance benefits, such as fraternal beneficiary societies, voluntary employees beneficiary associations, and labor organizations, are generally exceptions to this rule. File federal and state taxes free online Magazine publishing. File federal and state taxes free online   An association of credit unions with tax-exempt status as a business league publishes a consumer-oriented magazine four times a year and makes it available to member credit unions for purchase. File federal and state taxes free online   By selling a magazine to its members as a promotional device, the organization furnishes its members with a regular commercial service they can use in their own operations. File federal and state taxes free online This service does not promote the improvement of business conditions of one or more lines of business, which is the exempt purpose of a business league. File federal and state taxes free online   Since the activity does not contribute importantly to the organization's exempt function, it is an unrelated trade or business. File federal and state taxes free online Directory of members. File federal and state taxes free online   A business league publishes an annual directory that contains a list of all its members, their addresses, and their area of expertise. File federal and state taxes free online Each member has the same amount of space in the directory, and its format does not emphasize the relative importance or reputation of any member. File federal and state taxes free online The directory contains no commercial advertisement and is sold only to the organization's members. File federal and state taxes free online   The directory facilitates communication among the members and encourages the exchange of ideas and expertise. File federal and state taxes free online Because the directory lists the members in a similar noncommercial format without advertising and is not distributed to the public, its sale does not confer private commercial benefits on the members. File federal and state taxes free online The sale of the directory does contribute importantly to the organization's exempt purpose and is not an unrelated trade or business. File federal and state taxes free online This directory differs from the publication discussed next because of its noncommercial characteristics. File federal and state taxes free online Sales of advertising space. File federal and state taxes free online   A national association of law enforcement officials publishes a monthly journal that contains articles and other editorial material of professional interest to its members. File federal and state taxes free online The journal is distributed without charge, mainly to the organization's members. File federal and state taxes free online   The organization sells advertising space in the journal either for conventional advertising or to merely identify the purchaser without a commercial message. File federal and state taxes free online Some of the noncommercial advertising identifies the purchaser in a separate space, and some consists of listings of 60 or more purchasers per page. File federal and state taxes free online A business firm identified in a separate space is further identified in an Index of Advertisers. File federal and state taxes free online   The organization solicits advertising by personal contacts. File federal and state taxes free online Advertising from large firms is solicited by contacting their chief executive officer or community relations officer rather than their advertising manager. File federal and state taxes free online The organization also solicits advertising in form letters appealing for corporate and personal contributions. File federal and state taxes free online   An exempt organization's sale of advertising placed for the purchaser's commercial benefit is a commercial activity. File federal and state taxes free online Goodwill derived by the purchaser from being identified as a patron of the organization is usually considered a form of commercial benefit. File federal and state taxes free online Therefore, advertising in an exempt organization's publication is generally presumed to be placed for the purchaser's commercial benefit, even if it has no commercial message. File federal and state taxes free online However, this presumption is not conclusive if the purchaser's patronage would be difficult to justify commercially in view of the facts and circumstances. File federal and state taxes free online In that case, other factors should also be considered in determining whether a commercial benefit can be expected. File federal and state taxes free online Those other factors include: The normal manner in which the publication is circulated; The territorial scope of the circulation; The extent to which its readers, promoters, or the like could reasonably be expected to further, either directly or indirectly, the commercial interest of the advertisers; The eligibility of the publishing organization to receive tax-deductible contributions; and The commercial or noncommercial methods used to solicit the advertisers. File federal and state taxes free online   In this situation, the purchaser of a separate advertising space without a commercial message can nevertheless expect a commercial benefit from the goodwill derived from being identified in that manner as a patron of the organization. File federal and state taxes free online However, the purchaser of a listing cannot expect more than an inconsequential benefit. File federal and state taxes free online Therefore, the sale of separate spaces, but not the listings, is an unrelated trade or business. File federal and state taxes free online Publishing legal notices. File federal and state taxes free online   A bar association publishes a legal journal containing opinions of the county court, articles of professional interest to lawyers, advertisements for products and services used by the legal profession, and legal notices. File federal and state taxes free online The legal notices are published to satisfy state laws requiring publication of notices in connection with legal proceedings, such as the administration of estates and actions to quiet title to real property. File federal and state taxes free online The state designated the bar association's journal as the place to publish the required notices. File federal and state taxes free online   The publication of ordinary commercial advertising does not advance the exempt purposes of the association even when published in a periodical that contains material related to exempt purposes. File federal and state taxes free online Although the advertising is directed specifically to members of the legal profession, it is still commercial in nature and does not contribute importantly to the exempt purposes of the association. File federal and state taxes free online Therefore, the advertising income is unrelated trade or business income. File federal and state taxes free online   On the other hand, the publication of legal notices is distinguishable from ordinary commercial advertising in that its purpose is to inform the general public of significant legal events rather than to stimulate demand for the products or services of an advertiser. File federal and state taxes free online This promotes the common interests of the legal profession and contributes importantly to the association's exempt purposes. File federal and state taxes free online Therefore, the publishing of legal notices does not constitute an unrelated trade or business. File federal and state taxes free online Museum greeting card sales. File federal and state taxes free online    An art museum that exhibits modern art sells greeting cards that display printed reproductions of selected works from other art collections. File federal and state taxes free online Each card is imprinted with the name of the artist, the title or subject matter of the work, the date or period of its creation, if known, and the museum's name. File federal and state taxes free online The cards contain appropriate greetings and are personalized on request. File federal and state taxes free online   The organization sells the cards in the shop it operates in the museum and sells them at quantity discounts to retail stores. File federal and state taxes free online It also sells them by mail order through a catalog that is advertised in magazines and other publications throughout the year. File federal and state taxes free online As a result, a large number of cards are sold at a significant profit. File federal and state taxes free online   The museum is exempt as an educational organization on the basis of its ownership, maintenance, and exhibition for public viewing of works of art. File federal and state taxes free online The sale of greeting cards with printed reproductions of artworks contributes importantly to the achievement of the museum's exempt educational purposes by enhancing public awareness, interest, and appreciation of art. File federal and state taxes free online The cards may encourage more people to visit the museum itself to share in its educational programs. File federal and state taxes free online The fact that the cards are promoted and sold in a commercial manner at a profit and in competition with commercial greeting card publishers does not alter the fact that the activity is related to the museum's exempt purpose. File federal and state taxes free online Therefore, these sales activities are not an unrelated trade or business. File federal and state taxes free online Museum shop. File federal and state taxes free online   An art museum maintained and operated for the exhibition of American folk art operates a shop in the museum that sells: Reproductions of works in the museum's own collection and reproductions of artistic works from the collections of other art museums (prints suitable for framing, postcards, greeting cards, and slides); Metal, wood, and ceramic copies of American folk art objects from its own collection and similar copies of art objects from other collections of artworks; Instructional literature and scientific books and souvenir items concerning the history and development of art and, in particular, of American folk art; and Scientific books and souvenir items of the city in which the museum is located. File federal and state taxes free online   The shop also rents originals or reproductions of paintings contained in its collection. File federal and state taxes free online All of its reproductions are imprinted with the name of the artist, the title or subject matter of the work from which it is reproduced, and the museum's name. File federal and state taxes free online   Each line of merchandise must be considered separately to determine if sales are related to the exempt purpose. File federal and state taxes free online   The sale and rental of reproductions and copies of works from the museum's own collection and reproductions of artistic works not owned by the museum contribute importantly to the achievement of the museum's exempt educational purpose by making works of art familiar to a broader segment of the public, thereby enhancing the public's understanding and appreciation of art. File federal and state taxes free online The same is true for the sale of literature relating to art. File federal and state taxes free online Therefore, these sales activities are not an unrelated trade or business. File federal and state taxes free online   On the other hand, the sale of scientific books and souvenir items of the city where the museum is located has no causal relationship to art or to artistic endeavor and, therefore, does not contribute importantly to the accomplishment of the museum's exempt educational purposes. File federal and state taxes free online The fact that selling some of these items could, under different circumstances, be held related to the exempt educational purpose of some other exempt educational organization does not change this conclusion. File federal and state taxes free online Additionally, the sale of these items does not lose its identity as a trade or business merely because the museum also sells articles which do contribute importantly to the accomplishment of its exempt function. File federal and state taxes free online Therefore, these sales are an unrelated trade or business. File federal and state taxes free online Business league's parking and bus services. File federal and state taxes free online   A business league, whose purpose is to retain and stimulate trade in a downtown area that has inadequate parking facilities, operates a fringe parking lot and shuttle bus service. File federal and state taxes free online It also operates, as an insubstantial part of its activities, a park and shop plan. File federal and state taxes free online   The fringe parking lot and shuttle bus service operate in a manner that does not favor any individual or group of downtown merchants. File federal and state taxes free online The merchants cannot offer free or discount parking or bus fares to their customers. File federal and state taxes free online   The park and shop plan allows customers of particular merchants to park free at certain parking lots in the area. File federal and state taxes free online Merchants participating in this plan buy parking stamps, which they distribute to their customers to use to pay for parking. File federal and state taxes free online   Operating the fringe parking lot and shuttle bus service provides easy and convenient access to the downtown area and, therefore, stimulates and improves business conditions in the downtown area generally. File federal and state taxes free online That activity contributes importantly to the organization's accomplishing its exempt purpose and is not an unrelated trade or business. File federal and state taxes free online   The park and shop plan encourages customers to use a limited number of participating member merchants in order to obtain free parking. File federal and state taxes free online This provides a particular service to individual members of the organization and does not further its exempt purpose. File federal and state taxes free online Therefore, operating the park and shop plan is an unrelated trade or business. File federal and state taxes free online Youth residence. File federal and state taxes free online   An exempt organization, whose purpose is to provide for the welfare of young people, rents rooms primarily to people under age 25. File federal and state taxes free online The residence units are operated on, and as a part of, the premises in which the organization carries on the social, recreational, and guidance programs for which it was recognized as exempt. File federal and state taxes free online The facilities are under the management and supervision of trained career professionals who provide residents with personal counseling, physical education programs, and group recreational activities. File federal and state taxes free online The rentals are not an unrelated trade or business because renting the rooms is substantially related to the organization's exempt purpose. File federal and state taxes free online Health club program. File federal and state taxes free online   An exempt charitable organization's purpose is to provide for the welfare of young people. File federal and state taxes free online The organization conducts charitable activities and maintains facilities that will contribute to the physical, social, mental, and spiritual health of young people at minimum or no cost to them. File federal and state taxes free online Nominal annual dues are charged for membership in the organization and use of the facilities. File federal and state taxes free online   In addition, the organization organized a health club program that its members could join for an annual fee in addition to the annual dues. File federal and state taxes free online The annual fee is comparable to fees charged by similar local commercial health clubs and is sufficiently high to restrict participation in the program to a limited number of members of the community. File federal and state taxes free online   The health club program is in addition to the general physical fitness program of the organization. File federal and state taxes free online Operating this program does not contribute importantly to the organization's accomplishing its exempt purpose and, therefore, is an unrelated trade or business. File federal and state taxes free online Miniature golf course. File federal and state taxes free online   An exempt youth welfare organization operates a miniature golf course that is open to the general public. File federal and state taxes free online The course, which is managed by salaried employees, is substantially similar to commercial courses. File federal and state taxes free online The admission fees charged are comparable to fees of commercial facilities and are designed to return a profit. File federal and state taxes free online   The operation of the miniature golf course in a commercial manner does not contribute importantly to the accomplishment of the organization's exempt purpose and, therefore, is an unrelated trade or business. File federal and state taxes free online Sales of hearing aids. File federal and state taxes free online   A tax-exempt hospital, whose primary activity is rehabilitation, sells hearing aids to patients. File federal and state taxes free online This activity is an essential part of the hospital's program to test and evaluate patients with hearing deficiencies and contributes importantly to its exempt purpose. File federal and state taxes free online It is not an unrelated trade or business. File federal and state taxes free online Nonpatient laboratory testing. File federal and state taxes free online   Nonpatient laboratory testing performed by a tax-exempt teaching hospital on specimens needed for the conduct of its teaching activities is not an unrelated trade or business. File federal and state taxes free online However, laboratory testing performed by a tax-exempt non-teaching hospital on referred specimens from private office patients of staff physicians is an unrelated trade or business if these services are otherwise available in the community. File federal and state taxes free online Selling endorsements. File federal and state taxes free online   An exempt scientific organization enjoys an excellent reputation in the field of biological research. File federal and state taxes free online It exploits this reputation regularly by selling endorsements of laboratory equipment to manufacturers. File federal and state taxes free online Endorsing laboratory equipment does not contribute importantly to the accomplishment of any purpose for which exemption is granted to the organization. File federal and state taxes free online Accordingly, the sale of endorsements is an unrelated trade or business. File federal and state taxes free online Sponsoring entertainment events. File federal and state taxes free online   An exempt university has a regular faculty and a regularly enrolled student body. File federal and state taxes free online During the school year, the university sponsors the appearance of professional theater companies and symphony orchestras that present drama and musical performances for the students and faculty members. File federal and state taxes free online Members of the general public also are admitted. File federal and state taxes free online The university advertises these performances and supervises advance ticket sales at various places, including such university facilities as the cafeteria and the university bookstore. File federal and state taxes free online Although the presentation of the performances makes use of an intangible generated by the university's exempt educational functions—the presence of the student body and faculty—such drama and music events contribute importantly to the overall educational and cultural functions of the university. File federal and state taxes free online Therefore, the activity is not an unrelated trade or business. File federal and state taxes free online Excluded Trade or Business Activities The following activities are specifically excluded from the definition of unrelated trade or business. File federal and state taxes free online Volunteer workforce. File federal and state taxes free online   Any trade or business in which substantially all the work is performed for the organization without compensation is not an unrelated trade or business. File federal and state taxes free online Example 1. File federal and state taxes free online A retail store operated by an exempt orphanage where unpaid volunteers perform substantially all the work in carrying on the business is not an unrelated trade or business. File federal and state taxes free online Example 2. File federal and state taxes free online A volunteer fire company conducts weekly public dances. File federal and state taxes free online Holding public dances and charging admission on a regular basis may, given the facts and circumstances of a particular case, be considered an unrelated trade or business. File federal and state taxes free online However, because the work at the dances is performed by unpaid volunteers, the activity is not an unrelated trade or business. File federal and state taxes free online Convenience of members. File federal and state taxes free online   A trade or business conducted by a 501(c)(3) organization or by a governmental college or university primarily for the convenience of its members, students, patients, officers, or employees is not an unrelated trade or business. File federal and state taxes free online For example, a laundry operated by a college for the purpose of laundering dormitory linens and students' clothing is not an unrelated trade or business. File federal and state taxes free online Qualified sponsorship activities. File federal and state taxes free online   Soliciting and receiving qualified sponsorship payments is not an unrelated trade or business, and the payments are not subject to unrelated business income tax. File federal and state taxes free online Qualified sponsorship payment. File federal and state taxes free online   This is any payment made by a person engaged in a trade or business for which the person will receive no substantial benefit other than the use or acknowledgment of the business name, logo, or product lines in connection with the organization's activities. File federal and state taxes free online “Use or acknowledgment” does not include advertising the sponsor's products or services. File federal and state taxes free online The organization's activities include all its activities, whether or not related to its exempt purposes. File federal and state taxes free online   For example, if, in return for receiving a sponsorship payment, an organization promises to use the sponsor's name or logo in acknowledging the sponsor's support for an educational or fundraising event, the payment is a qualified sponsorship payment and is not subject to the unrelated business income tax. File federal and state taxes free online   Providing facilities, services, or other privileges (for example, complimentary tickets, pro-am playing spots in golf tournaments, or receptions for major donors) to a sponsor or the sponsor's designees in connection with a sponsorship payment does not affect whether the payment is a qualified sponsorship payment. File federal and state taxes free online Instead, providing these goods or services is treated as a separate transaction in determining whether the organization has unrelated business income from the event. File federal and state taxes free online Generally, if the services or facilities are not a substantial benefit or if providing them is a related business activity, the payments will not be subject to the unrelated business income tax. File federal and state taxes free online   Similarly, the sponsor's receipt of a license to use an intangible asset (for example, a trademark, logo, or designation) of the organization is treated as separate from the qualified sponsorship transaction in determining whether the organization has unrelated business taxable income. File federal and state taxes free online   If part of a payment would be a qualified sponsorship payment if paid separately, that part is treated as a separate payment. File federal and state taxes free online For example, if a sponsorship payment entitles the sponsor to both product advertising and the use or acknowledgment of the sponsor's name or logo by the organization, then the unrelated business income tax does not apply to the part of the payment that is more than the fair market value of the product advertising. File federal and state taxes free online Advertising. File federal and state taxes free online   A payment is not a qualified sponsorship payment if, in return, the organization advertises the sponsor's products or services. File federal and state taxes free online For information on the treatment of payments for advertising, see Exploitation of Exempt Activity—Advertising Sales in chapter 4. File federal and state taxes free online   Advertising includes: Messages containing qualitative or comparative language, price information, or other indications of savings or value; Endorsements; and Inducements to purchase, sell, or use the products or services. File federal and state taxes free online   The use of promotional logos or slogans that are an established part of the sponsor's identity is not, by itself, advertising. File federal and state taxes free online In addition, mere distribution or display of a sponsor's product by the organization to the public at a sponsored event, whether for free or for remuneration, is considered use or acknowledgment of the product rather than advertising. File federal and state taxes free online Exception for contingent payments. File federal and state taxes free online   A payment is not a qualified sponsorship payment if its amount is contingent, by contract or otherwise, upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events. File federal and state taxes free online However, the fact that a sponsorship payment is contingent upon an event actually taking place or being broadcast does not, by itself, affect whether a payment qualifies. File federal and state taxes free online Exception for periodicals. File federal and state taxes free online   A payment is not a qualified sponsorship payment if it entitles the payer to the use or acknowledgment of the business name, logo, or product lines in the organization's periodical. File federal and state taxes free online For this purpose, a periodical is any regularly scheduled and printed material (for example, a monthly journal) published by or on behalf of the organization. File federal and state taxes free online It does not include material that is related to and primarily distributed in connection with a specific event conducted by the organization (for example, a program or brochure distributed at a sponsored event). File federal and state taxes free online   The treatment of payments that entitle the payer to the depiction of the payer's name, logo, or products lines in an organization's periodical is determined under the rules that apply to advertising activities. File federal and state taxes free online See Sales of advertising space under Examples, earlier in this chapter. File federal and state taxes free online Also see Exploitation of Exempt Activity—Advertising Sales in chapter 4. File federal and state taxes free online Exception for conventions and trade shows. File federal and state taxes free online   A payment is not a qualified sponsorship payment if it is made in connection with any qualified convention or trade show activity. File federal and state taxes free online The exclusion of qualified convention or trade show activities from the definition of unrelated trade or business is explained later under Convention or trade show activity. File federal and state taxes free online Selling donated merchandise. File federal and state taxes free online   A trade or business that consists of selling merchandise, substantially all of which the organization received as gifts or contributions, is not an unrelated trade or business. File federal and state taxes free online For example, a thrift shop operated by a tax-exempt organization that sells donated clothes and books to the general public, with the proceeds going to the exempt organization, is not an unrelated trade or business. File federal and state taxes free online Employee association sales. File federal and state taxes free online   The sale of certain items by a local association of employees described in section 501(c)(4), organized before May 17, 1969, is not an unrelated trade or business if the items are sold for the convenience of the association's members at their usual place of employment. File federal and state taxes free online This exclusion applies only to the sale of work-related clothes and equipment and items normally sold through vending machines, food dispensing facilities, or by snack bars. File federal and state taxes free online Bingo games. File federal and state taxes free online   Certain bingo games are not included in the term “unrelated trade or business. File federal and state taxes free online ” To qualify for this exclusion, the bingo game must meet the following requirements. File federal and state taxes free online It meets the legal definition of bingo. File federal and state taxes free online It is legal where it is played. File federal and state taxes free online It is played in a jurisdiction where bingo games are not regularly conducted by for-profit organizations. File federal and state taxes free online Legal definition. File federal and state taxes free online   For a game to meet the legal definition of bingo, wagers must be placed, winners must be determined, and prizes or other property must be distributed in the presence of all persons placing wagers in that game. File federal and state taxes free online   A wagering game that does not meet the legal definition of bingo does not qualify for the exclusion, regardless of its name. File federal and state taxes free online For example, “instant bingo,” in which a player buys a pre-packaged bingo card with pull-tabs that the player removes to determine if he or she is a winner, does not qualify. File federal and state taxes free online Legal where played. File federal and state taxes free online   This exclusion applies only if bingo is legal under the laws of the jurisdiction where it is conducted. File federal and state taxes free online The fact that a jurisdiction's law that prohibits bingo is rarely enforced or is widely disregarded does not make the conduct of bingo legal for this purpose. File federal and state taxes free online No for-profit games where played. File federal and state taxes free online   This exclusion applies only if for-profit organizations cannot regularly conduct bingo games in any part of the same jurisdiction. File federal and state taxes free online Jurisdiction is normally the entire state; however, in certain situations, local jurisdiction will control. File federal and state taxes free online Example. File federal and state taxes free online Tax-exempt organizations X and Y are organized under the laws of state N, which has a law that permits exempt organizations to conduct bingo games. File federal and state taxes free online In addition, for-profit organizations are permitted to conduct bingo games in city S, a resort community located in county R. File federal and state taxes free online Several for-profit organizations conduct nightly games. File federal and state taxes free online Y conducts weekly bingo games in city S, while X conducts weekly games in county R. File federal and state taxes free online Since state law confines the for-profit organizations to city S, local jurisdiction controls. File federal and state taxes free online Y's bingo games conducted in city S are an unrelated trade or business. File federal and state taxes free online However, X's bingo games conducted in county R outside of city S are not an unrelated trade or business. File federal and state taxes free online Gambling activities other than bingo. File federal and state taxes free online   Any game of chance conducted by an exempt organization in North Dakota is not an unrelated trade or business if conducting the game does not violate any state or local law. File federal and state taxes free online Pole rentals. File federal and state taxes free online   The term unrelated trade or business does not include qualified pole rentals by a mutual or cooperative telephone or electric company described in section 501(c)(12). File federal and state taxes free online A qualified pole rental is the rental of a pole (or other structure used to support wires) if the pole (or other structure) is used: By the telephone or electric company to support one or more wires that the company uses in providing telephone or electric services to its members, and According to the rental, to support one or more wires (in addition to the wires described in 1 ) for use in connection with the transmission by wire of electricity or of telephone or other communications. File federal and state taxes free online For this purpose, the term rental includes any sale of the right to use the pole (or other structure). File federal and state taxes free online Distribution of low cost articles. File federal and state taxes free online   The term unrelated trade or business does not include activities relating to the distribution of low cost articles incidental to soliciting charitable contributions. File federal and state taxes free online This applies to organizations described in section 501 that are eligible to receive charitable contributions. File federal and state taxes free online   A distribution is considered incidental to the solicitation of a charitable contribution if: The recipient did not request the distribution, The distribution is made without the express consent of the recipient, and The article is accompanied by a request for a charitable contribution to the organization and a statement that the recipient may keep the low cost article regardless of whether a contribution is made. File federal and state taxes free online   An article is considered low cost if the cost of an item (or the aggregate costs if more than one item) distributed to a single recipient in a tax year is not more than $5, indexed annually for inflation. File federal and state taxes free online The maximum cost of a low cost article is $9. File federal and state taxes free online 70 for 2011. File federal and state taxes free online The cost of an article is the cost to the organization that distributes the item or on whose behalf it is distributed. File federal and state taxes free online Exchange or rental of member lists. File federal and state taxes free online   The exchange or rental of member or donor lists between organizations described in section 501 that are eligible to receive charitable contributions is not included in the term unrelated trade or business. File federal and state taxes free online Hospital services. File federal and state taxes free online   The providing of certain services at or below cost by an exempt hospital to other exempt hospitals that have facilities for 100 or fewer inpatients is not an unrelated trade or business. File federal and state taxes free online This exclusion applies only to services described in section 501(e)(1)(A). File federal and state taxes free online Public entertainment activity. File federal and state taxes free online   An unrelated trade or business does not include a qualified public entertainment activity. File federal and state taxes free online A public entertainment activity is one traditionally conducted at a fair or exposition promoting agriculture and education, including any activity whose purpose is designed to attract the public to fairs or expositions or to promote the breeding of animals or the development of products or equipment. File federal and state taxes free online   A qualified public entertainment activity is one conducted by a qualifying organization: In conjunction with an international, national, state, regional, or local fair or exposition; In accordance with state law that permits the activity to be operated or conducted solely by such an organization or by an agency, instrumentality, or political subdivision of the state; or In accordance with state law that permits an organization to be granted a license to conduct an activity for not more than 20 days on paying the state a lower percentage of the revenue from the activity than the state charges nonqualifying organizations that hold similar activities. File federal and state taxes free online   For these purposes, a qualifying organization is an organization described in section 501(c)(3), 501(c)(4), or 501(c)(5) that regularly conducts an agricultural and educational fair or exposition as one of its substantial exempt purposes. File federal and state taxes free online Its conducting qualified public entertainment activities will not affect determination of its exempt status. File federal and state taxes free online Convention or trade show activity. File federal and state taxes free online   An unrelated trade or business does not include qualified convention or trade show activities conducted at a convention, annual meeting, or trade show. File federal and state taxes free online   A qualified convention or trade show activity is any activity of a kind traditionally conducted by a qualifying organization in conjunction with an international, national, state, regional, or local convention, annual meeting, or show if: One of the purposes of the organization in sponsoring the activity is promoting and stimulating interest in, and demand for, the products and services of that industry or educating the persons in attendance regarding new products and services or new rules and regulations affecting the industry; and The show is designed to achieve its purpose through the character of the exhibits and the extent of the industry products that are displayed. File federal and state taxes free online   For these purposes, a qualifying organization is one described in section 501(c)(3), 501(c)(4), 501(c)(5), or 501(c)(6). File federal and state taxes free online The organization must regularly conduct, as one of its substantial exempt purposes, a qualified convention or trade show activity. File federal and state taxes free online   The rental of display space to exhibitors (including exhibitors who are suppliers) at a qualified convention or trade show is not an unrelated trade or business even if the exhibitors who rent the space are permitted to sell or solicit orders. File federal and state taxes free online For this purpose, a supplier's exhibit is one in which the exhibitor displays goods or services that are supplied to, rather than by, members of the qualifying organization in the conduct of these members' own trades or businesses. File federal and state taxes free online    Certain Internet activities conducted by a trade association described in section 501(c)(6) will be considered qualified convention and trade show activity if conducted on a special supplementary section of the association's website in conjunction with a trade show conducted by the association. File federal and state taxes free online The trade show itself must be a qualified convention and trade show activity. File federal and state taxes free online The supplementary section of the website must be ancillary to, and serve to augment and enhance, the trade show, as when it makes available the same information available at the trade show and is available only during a time period that coincides with the time period that the trade show is in operation. File federal and state taxes free online Conversely, Internet activities that are not conducted in conjunction with a qualified convention and trade show activity and that do not augment and enhance the trade show cannot themselves be qualified convention and trade show activity. File federal and state taxes free online Prev  Up  Next   Home   More Online Publications