Part 1: Is your activity a trade or business?

The first part of the UBI test is to determine if your activity is a trade or business.

If your organization is selling goods or services to generate income, even if it is conducting the activity within a larger group of activities related to its exempt purpose, the activity is a trade or business. So, while your 501(c)(3) is carrying on its daily exempt function, it could also be carrying on activities that are taxable.

See examples:

Example 1
Example 2