What defines an UBI excluded activity in healthcare organizations?

An unrelated business income (UBI) excluded activity in healthcare organizations is defined by the income generated that does not bear a substantial relationship to the organization’s exempt purpose. The focus is on distinguishing income from activities that are both unrelated to the organization's primary exempt functions and those that might be considered incidental, such as income generated from a trade or business that has no substantial contribution to its mission.

Option B suggests that all income generated from unrelated business activities is excluded, which aligns with the IRS guidelines on UBI. Unrelated business income can arise from activities that do not serve the organization's core mission, but certain exclusions apply based on the nature of the activities and their relationship to the exempt function.

Looking at the other options, selling merchandise or profit from public services does not inherently qualify for exclusion, as these activities can generate UBI depending on their relevance to the organization's mission. Similarly, activities based primarily on donations or contributions wouldn't fall under UBI since they directly support the exempt purpose, rather than being considered unrelated business activities. Therefore, B accurately encapsulates the essence of UBI excluded activities in the context of healthcare organizations.