Choice "C" is correct. An exempt organization is not taxed on unrelated business income of less than $1,000. The exempt organization is allowed a specific deduction of $1,000 from its unrelated business income.
Choice "d" is incorrect. There is no maximum amount of unrelated business income that may be earned during the year.
Choice "b" is incorrect. An unrelated business is a trade or business regularly carried on by the organization that is not substantially related to the exercise or performance of its exempt purpose or function. If the business activity is intermittent and carried on once a year, the tax imposed on unrelated business income would not be assessed.
Choice "a" is incorrect. An unrelated trade or business activity that results in a loss is not excluded from the definition of unrelated business.