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Exam 12: Tax Credits and Payments

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Question 1

True/False

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The purpose of the tax credit for rehabilitation expenditures is to encourage the relocation of businesses from older, economically distressed areas (i.e., inner city) to newer locations.

A) True
B) False

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Question 2

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Identify the statement below that is false.

A) If an employer is not required to withhold income taxes from an employee's wages, the wages are not taxable to the employee.
B) In certain situations, income tax withholding by an employer is voluntary.
C) An employer must deposit with the government an amount of FICA tax that is more than twice the amount withheld from the employee's salary (i.e., the employee's and employer's shares) .
D) If an excess amount of FICA has been withheld for an employee because the employee has multiple jobs, the employee may claim a credit for the excess amount withheld on his or her income tax return.
E) None of the above.

F) B) and E)
G) B) and C)

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Question 3

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

If an employee holds two jobs during the year, an overwithholding of FICA tax will result.

Unless a taxpayer is disabled, the tax credit for the elderly or disabled is available only if the taxpayer is at least 59 1/2 years old.

The calculation of FICA and the self-employment tax both involve two components: the Social Security portion and the Medicare portion, each portion of which is imposed on the same base amounts.

Golden Corporation is an eligible small business for purposes of the disabled access credit.During the year, Golden makes the following expenditures on a structure originally placed in service in 1988.

The low-income housing credit is available to low-income tenants who reside in qualifying low-income housing.

If a taxpayer is required to recapture any tax credit for rehabilitation expenditures, the recapture amount need not be added to the adjusted basis of the rehabilitation expenditures.

In 2011, Juan and Juanita incur $9,800 in legal and adoption fees directly related to the adoption of an infant son born in a nearby state.Over the next year, they incur another $4,500 of adoption expenses.The adoption becomes final in 2012.Which of the following choices properly reflects the amounts and years in which the adoption expenses credit is available. 2011 2012

Jermaine and Kesha are married, file a joint tax return, have AGI of $82,500, and have two children.Devona is beginning her freshman year at State University during Fall 2012, and Arethia is beginning her senior year at Northeast University during Fall 2012 after having completed her junior year during the spring of that year.Both Devona and Arethia are claimed as dependents on their parents' tax return.Devona's qualifying tuition expenses and fees total $4,000 for the fall semester, while Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2012.Full payment is made for the tuition and related expenses for both children during each semester.The American Opportunity credit available to Jermaine and Kesha for 2012 is:

In computing the foreign tax credit, the greater of the foreign income taxes paid or the overall limitation is allowed.

A small employer incurs $1,600 for consulting fees related to establishing a qualified retirement plan for its 75 employees.As a result, the employer may claim the credit for small employer pension plan startup costs for $800.

During the year, Green, Inc., incurs the following research expenditures: Green's qualifying research expenditures for the year are:

John owns and operates a real estate agency as a sole proprietor.On a full-time basis, he employs his 17-year old daughter as a receptionist and his 22-year old son as a bookkeeper.Only the son is subject to FICA withholding.

Certain high-income individuals are subject to three additional Medicare taxes beginning in 2013-on wages, unearned income, and tax credits claimed.

Several years ago, Sarah purchased a structure for $150,000 that was originally placed in service in 1929.In the current year, she incurred qualifying rehabilitation expenditures of $200,000.The amount of the tax credit for rehabilitation expenditures, and the amount by which the building's basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts:

Qualifying tuition expenses paid from the proceeds of a tax-exempt scholarship do not give rise to an education tax credit.

Qualified rehabilitation expenditures include the cost of acquiring the building, but not the cost of acquiring the land.

Which of the following correctly reflects current rules regarding estimated tax payments for individuals?