Exam 6: Credits and Special Taxes

In 2015, Alex has income from wages of $16,000, adjusted gross income of $18,000, and tax liability of $300 before the earned income credit. What is the amount of Alex's earned income credit for 2015, assuming he is single and his 5-year-old dependent son lives with him for the full year?

Robert and Mary file a joint tax return for 2015 with adjusted gross income of $34,000. Robert and Mary earned income of $20,000 and $14,000, respectively, during 2015. In order for Mary to be gainfully employed, they pay the following child care expenses for their 4-year-old son, John: What is the amount of the child and dependent care credit they should report on their tax return for 2015?

Which one of the following conditions must be satisfied in order for a married taxpayer to be taxed on only his income if he resides in a community property state?

Jim has foreign income. He earns $26,000 from Country A which taxes the income at a 20 percent rate. He also has income from Country B of $18,000. Country B taxes the $18,000 at a 10 percent rate. His U.S. taxable income is $90,000, which includes the foreign income. His U.S. income tax on all sources of income before credits is $19,000. What is his foreign tax credit?

Married taxpayers must file a joint tax return to claim the child and dependent care credit.

For all taxpayers, except those married filing separately, the individual alternative minimum tax rate for 2015 is 26 percent on the first $185,400 of income and 28 percent on income above $185,400.

The American Opportunity tax credit

Assume Karen is 12 years old and her only income is $2,500 of interest income from a bank account with money her parents have given her to save for college. What are the options Karen has for filing her tax return?

In 2015, Erin purchased a solar system to generate electricity for her home, at a cost of $5,000. a.How much is her tax credit in 2015? b.If she had purchased a solar heating system for her swimming pool at a cost of $3,500, how much could she claim as a tax credit? c.If she had purchased a $5,000 solar electric system and a $4,500 solar heating system for her principal home (not for the swimming pool), how much could she claim as a tax credit? d.If she had purchased the electric system for her principal residence and the solar heating system for a second residence, how much could she claim as a tax credit?

Jeff is a stay-at-home father who earns $600 from odd jobs and takes care of his daughter. His wife, Michelle, is the bread-winner and brings in $60,000 of income a year. In addition to the care provided by Jeff, Michelle pays $4,500 in child care. ​ In the current year, how much are Jeff and Michelle's qualifying expenses for the child and dependent care credit?

Unearned income of a 16-year-old child may be taxed at his or her parents' income tax rate.

Jenny adopts a Vietnamese orphan. The adoption takes three years, two trips to Vietnam, and becomes final in 2015. She pays $10,000 in 2013, $5,000 in 2014, and $5,000 in 2015 of qualified adoption expenses. She has AGI of $150,000. a.What is the adoption credit Jenny can claim in 2015? b.How much credit could she claim if the adoption falls through and is never finalized?

Curly and Rita are married, file a joint return, and have two dependent children, ages 11 and 13. Their AGI is $117,000. By how much is their child credit reduced in 2015?

Dan and Maureen file a joint income tax return for 2015. They have two dependent children, ages 7 and 9. Together they earn wages of $152,000. They also receive taxable interest income of $8,000 and interest on City of Los Angeles bonds of $12,000. During 2015, they received a state income tax refund of $3,000 relating to their 2014 state income tax return on which they itemized deductions. Their expenses for the year consist of the following: Calculate Dan and Maureen's tentative minimum tax liability assuming an exemption amount of $83,400, before any phase-outs. Show your calculations.

In 2015, Brady purchases a 2015 Nissan Leaf electric vehicle for his personal use. He is eligible to claim a credit of $7,500. He is in the 35 percent marginal tax bracket and his regular tax liability before credits is $14,800. What is the tax benefit Brady realizes from this purchase?

What would reduce income taxes more: a $100 tax credit or a $100 tax deduction?

Richard has $30,000 of income from a country that imposes a 40-percent income tax and $30,000 of income from a country that imposes a 34- percent income tax. In addition to the foreign income, he has taxable income from U.S. sources of $120,000 and a U.S. tax liability, before credits, of $45,575. The amount of Richard's foreign tax credit is:

In all community property states, income from community property is community income.

The foreign tax credit applies only to foreign corporations.

John and Susan file a joint income tax return for 2015. They have two dependent children, students, ages 19 and 20. John earns wages of $108,000 and they have interest income of $2,000. In 2015, they settle a state tax audit and pay $50,000 for back state taxes due to an overly aggressive tax-sheltered investment. Their other expenses for the year include: ​ a.Calculate John and Susan's 2015 regular tax and tentative minimum tax on the schedule provided.​ ​ b.How much is the total tax liability shown on John and Susan's 2015 Form 1040?