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Exam 13: Tax Credits and Payment Procedures

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Question 21

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Molly has generated general business credits over the years that have not been utilized.The amounts generated and not utilized follow: In the current year,2012,her business generates an additional $30,000 general business credit.In 2012,based on her tax liability before credits,she can utilize a general business credit of up to $40,000.After utilizing the carryforwards and the current year credits,how much of the general business credit generated in 2012 is available for future years?

A) $0.
B) $2,000.
C) $28,000.
D) $30,000.
E) None of the above.

F) D) and E)
G) A) and E)

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Question 22

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Nonrefundable credits are those that reduce the taxpayer's tax liability but are not paid when the amount of the credit (or credits)exceeds the taxpayer's tax liability.

A) True
B) False

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Question 23

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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.

The disabled access credit is computed at the rate of 50% of all access expenditures incurred by the taxpayer during the year.

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

Phil and Audrey,husband and wife,are both employed by Laurel Corporation.Phil earns $112,000 in salary in 2012,and Audrey earns $70,000.How much FICA tax must they pay for 2012?

Cardinal Corporation hires two persons certified to be eligible employees for the work opportunity tax credit under the general rules (e.g.,food stamp recipients) ,each of whom is paid $9,000 during the year.As a result of this event,Cardinal Corporation may claim a work opportunity credit of:

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

In May 2008,Cindy incurred qualifying rehabilitation expenditures of $500,000 on a certified historic structure and properly claimed the tax credit for rehabilitation expenditures.In March 2012,she sold the building at a loss.Calculate the rehabilitation expenditures credit recapture that she must report in 2012.

In May 2012,Blue Corporation hired Camilla,Jolene,and Tyrone,all of whom are certified as long-term family assistance recipients.Each employee is paid $12,000 during 2012.Camilla and Tyrone continued to work for Blue Corporation in 2013,earning $14,000 each.Blue hired no additional employees during 2013.

Which,if any,of the following correctly describes the research activities credit?

An expatriate who works in a country with an income tax rate higher than the U.S.rate probably will find the foreign earned income exclusion preferable to the foreign tax credit.

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

Bob and Sally are married,file a joint tax return,have AGI of $108,000,and have two children.Del is beginning her freshman year at State College during Fall 2012,and Owen is beginning his senior year at Southwest University during Fall 2012.Owen completed his junior year during the Spring semester of 2010 (i.e.,he took a "leave of absence" during the 2011-2012 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 2012 semester.Del's room and board costs were $3,200 for the Fall semester.Owen did not incur room and board costs since 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 2012.Compute the available education tax credits for Bob and Sally for 2012.

Discuss the treatment of unused general business credits.

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.

A taxpayer who meets the age requirement and receives no Social Security benefits will be entitled to the full tax credit for the elderly.

Several years ago,Tom purchased a structure for $300,000 that was originally placed in service in 1929.Three and one-half years ago he incurred qualifying rehabilitation expenditures of $600,000.In the current year,Tom sold the property in a taxable transaction.Calculate the amount of the recapture of the tax credit for rehabilitation expenditures.

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.

An employer's tax deduction for wages is not affected by the work opportunity tax credit.