6
QuizMultiple Choice

Investing — Test

Question 6 • Personal Finance

Which activity does the IRS allow nonprofit organizations to engage in?

Answer
A
collecting a profit as a means to generate income
B
advertising tax deductions for donations
C
filing the same tax forms as for-profit organizations
D
compensating business owners based on profits

Explanation

A nonprofit may earn a profit through its activities; the key restriction is that its profits cannot be distributed to owners or private individuals and must support its mission. Thus, collecting income that results in a profit is allowed. Compensating owners based on profits would violate this restriction.

AI-written and checked against the verified answer.

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