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Exam 12: Tax Credits and Payments

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Question 41

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Both education tax credits are available for qualified tuition expenses, and in certain instances, also may be available for room and board.

A) True
B) False

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Question 42

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Susan generated $55,000 of net earnings from the conduct of a tax preparation business that she operated during the tax-filing season. She also received wages of $66,800 from her full-time job. Compute the self-employment taxes due for 2014.

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Self-employment earnings subject to the ...

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Question 43

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The ceiling amounts and percentages for 2014 for the two portions of the self-employment tax are: Social Security portion Medicare portion

Rex and Dena are married and have two children, Michelle (age 7) and Nancy (age 5) . During 2014, Rex earned a salary of $24,500, received interest income of $300, and filed a joint income tax return with Dena. Dena had $0 gross income. Their earned income credit for the year is:

Amber is in the process this year of renovating the office building (originally placed in service in 1976) used by her business. Because of current Federal Regulations that require the structure to be accessible to handicapped individuals, she incurs an additional $11,000 for various features, such as ramps and widened doorways, to make her office building more accessible. The $11,000 incurred will produce a disabled access credit of what amount?

If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp, the cost of the ramp qualifies for the disabled access credit.

Explain the purpose of the tax credit for rehabilitation expenditures and describe the general characteristics of its computation.

Ahmad is considering making a $10,000 investment in a venture which its promoter promises will generate immediate tax benefits for him. Ahmad, who normally itemizes his deductions, is in the 28% marginal tax bracket. If the investment is of a type where the taxpayer may claim either a tax credit of 25% of the amount of the expenditure or an itemized deduction for the amount of the investment, what treatment normally would be most beneficial to Ahmad and by how much will Ahmad's tax liability decline because of the investment?

The tax benefit received from a tax credit is never affected by the tax rate of the taxpayer.

Summer Corporation's business is international in scope and is subject to income taxes in several countries. Summer's earnings and income taxes paid in the relevant foreign countries are: $\begin{array}{lrr}\underline{\text { Country }}&\underline{\text { Income }}&\underline{\text { Taxes }}\\\text { A } & \$ 1,000,000 & \$ 500,000 \\\text { B } & 300,000 & 30,000 \\\text { C } & 400,000 & 120,000 \\ \text { Total } & \$ 1,700,000 & \$ 650,000\end{array}$ If Summer Corporation's worldwide income subject to taxation in the United States is $2,400,000 and the U.S. income tax due prior to the foreign tax credit is $816,000, compute the allowable foreign tax credit. If, instead, the total foreign income taxes paid were $550,000, compute the allowable foreign tax credit.

In March 2014, Gray Corporation hired two individuals, both of whom were certified as long-term recipients of family assistance benefits. Each employee was paid $11,000 during 2014. Only one of the individuals continued to work for Gray Corporation in 2015, earning $9,000 during the year. No additional workers were hired in 2015. Gray Corporation's work opportunity tax credit amounts for 2014 and 2015 are:

Which of the following statements regarding the adoption expenses credit is not true?

BlueCo incurs $900,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre­school age children during normal working hours. The credit for employer­provided child care available to BlueCo this year is $225,000.

The child tax credit is based on the number of the taxpayer's qualifying children under age 17.

Because current U.S. corporate income tax rates are higher than many foreign corporate income tax rates, the overall limitation does not yield a lower foreign tax credit than the amount of foreign taxes actually paid.

All foreign taxes qualify for the foreign tax credit.

A LIFO method is applied to general business credit carryovers, carrybacks, and utilization of credits earned during a particular year.

The maximum credit for child and dependent care expenses is $2,100 if only one spouse is employed and the other spouse is a full-time student.

Refundable tax credits include the:

Discuss the treatment of unused general business credits.