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Exam 13: Tax Credits and Payment Procedures

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Question 41

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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?

A) $0,take neither the itemized deduction nor the tax credit.
B) $2,500,take the tax credit.
C) $2,800,take the itemized deduction.
D) Both options produce the same benefit.
E) None of the above.

F) B) and D)
G) B) and E)

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Question 42

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Julia is 30 years old,unmarried with a 9 year-old daughter,and has earnings during 2016 of $19,700.Does she qualify for the earned income credit? If so,calculate the amount of credit that is available to her.

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Maximum credit available for 2016 ($9,92...

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Question 43

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During the year,Green Corporation (a U.S.corporation) has U.S.-source income of $750,000 and foreign income of $500,000.The foreign-source income generates foreign income taxes of $240,000.The U.S.income tax before the foreign tax credit is $425,000.Green Corporation's foreign tax credit is:

All taxpayers are eligible to take the basic research credit.

The purpose of the work opportunity tax credit is to encourage employers to hire individuals from specified target groups traditionally subject to high rates of unemployment.

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 $68,300 from her full-time job.Compute the self-employment taxes due for 2016.

In the event that overwithholding of FICA tax occurs because the taxpayer has more than one employer,the excess amount should be claimed as a credit on the Federal income tax return of the employee.

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.

Bob and Sally are married,file a joint tax return,report AGI of $115,000,and have two children.Del is beginning her freshman year at State College during Fall 2016,and Owen is beginning his senior year at Southwest University during Fall 2016.Owen completed his junior year during the Spring semester of 2015 (i.e. ,he took a "leave of absence" during the 2015-2016 school year) .Both Del and Owen are claimed as dependents on their parents' tax return. ​ Del's qualifying tuition expenses and fees total $5,000 for the Fall semester,while Owen's qualifying tuition expenses were $6,100 for the Fall 2016 semester.Del's room and board costs were $3,200 for the Fall semester.Owen did not incur room and board costs,as he lived with his aunt and uncle during the year. ​ Full payment is made for the tuition and related expenses for both children at the beginning of each semester.In addition to the children's college expenses,Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist.Bob attended the seminars during July and August 2016.Compute the available education tax credits for Bob and Sally for 2016.

Any unused general business credit must be carried back 3 years and then forward for 20 years.

The tax benefits resulting from tax credits and tax deductions are affected by the tax rate bracket of the taxpayer.

Realizing that providing for a comfortable retirement is up to them,Jim and Julie commit to making regular contributions to their IRAs,beginning this year.Consequently,they each make a $2,000 contribution to their traditional IRA.If their AGI is $35,000 on their joint return,what is the amount of their credit for certain retirement plan contributions?

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

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

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

Child care payments to a relative are not eligible for the credit for child and dependent care expenses if the relative is a child (under age 19)of the taxpayer.

In describing FICA taxes,which (if any) of the following statements is incorrect?

Which of the following correctly describes the tax credit for rehabilitation expenditures?

During the year,Green,Inc. ,incurs the following research expenditures: In-house wages,supplies,computer time $60,000 Paid to Blue Foundation for research 30,000 ​ Green's qualifying research expenditures for the year are:

Which of the following statements is true regarding the education tax credits?