Gift Shop UBIT. A local exempt organization that trains at-risk youth for employment has an annual operating budget of $300,000, which includes revenue from operating a gift shop in a nearby hotel lobby. Gift shop sales result in a profit of $15,000. The organization has $6,500 of endowment income that it earns on permanently restricted net assets. The income from both the gift shop and the endowment is used to support the organization%u2019s exempt purpose. The balance of $278,500 required for annual operations is provided through public support and charges for services.
Required
a. Calculate the UBIT if the corporate tax rate is 15 percent on the first $50,000 of net income and 25 percent on the next $25,000 of income.
b. Assume that the endowment income is reinvested rather than being used to support annual operations. Calculate the amount of unrelated business income.