UCLA's proposed new hotel comes with a business plan chock full of ways to fill 250 rooms such as visiting parents, etc. The plan assumes such uses are tax-free. And the plan is built on financing that doesn't allow commercial uses. But if you take Stanford's course on UBITOMY, you can learn something about the taxable status of such uses:
Unrelated Business Income (UBI) Tutorial
Stanford University is exempt from income tax under
Section 501(c)(3) of the Internal Revenue Code on income from activities that
are substantially related to its educational and research missions, which form
the basis for the University's tax exemption.
However, if Stanford were to carry on a trade or business
activity that is not substantially related to its exempt purposes, it would be
subject to tax on the net income of such a business activity, even though it
may bring in funds to support Stanford's exempt operations…
Rents from real property are generally excluded from
unrelated business income… The rental exclusion does not apply when personal
services are also rendered to the tenant. In addition, the exclusion does not apply to rental of hotel rooms, rooms in
boarding houses or tourist homes, or spaces in parking lots or warehouses.
Example
A
University contemplates building and operating a full service hotel on campus
to house visiting scholars, parents, visiting athletic teams and guests. The
operation of the hotel is an unrelated business activity…
Source: http://www.stanford.edu/group/fms/fingate/staff/taxcompliance/res_jobaid/unRelated_bus_income.html
Apparently, UCLA does not offer this course. But you've read it here so when the hotel is built and the IRS comes calling, please don't say you weren't warned:
And by the way, UCLA and the Regents were warned about tax issues in public testimony at the last Regents meeting - also available on this blog - by a representative of local hotel operators.
1 comment:
Nice information about UBI in this post. This is really very good course. The hotel industry is also vast so nice scope in this field. online course
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