Exam 6: Credits and Special Taxes

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 30 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 $53,450.The amount of Richard's foreign tax credit is:

Salary earned by minors may be taxed at their parents' tax rate.

List at least two AMT preferences and/or adjustments and show the simplified formula for calculating AMT.Do not include dollar exemption amounts or the tax rate schedule.

Taxpayer Q has net taxable income of $30,000 from Country Y which imposes a 40 percent income tax.In addition to the income from Country Y,taxpayer Q has net taxable income from U.S.sources of $120,000,and U.S.tax liability,before the foreign tax credit,of $41,750.What is the amount of Q's foreign tax credit?

Which of the following is true of the alternative minimum tax?

A tax credit is allowed for qualified adoption expenses paid by taxpayers:

In determining the amount of the child and dependent care credit,there is a limit of $2,000 on the amount of qualified expenses for one dependent.

Martin and Rachel are married and have a 3-year-old child.Martin is going to medical school full-time for 12 months of the year and Rachel earns $45,000.Their child is in day care so Martin can go to school while Rachel is at work.The cost of their day care is $10,000.What is their child and dependent care credit? Please show your calculations and explain.

Patricia and Cliff are married but file separate tax returns.Patricia received a salary of $42,000 and Cliff received $15,000 of dividends from a stock portfolio that is his own separate property. a.If Patricia and Cliff live in a common law state,what income should Patricia show on her separate return? Salary Dividends b.If they live in California a community property state),what income should Patricia show on her separate return? Salary Dividends

In 2013,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 2013,assuming his 5-year-old dependent son lived with him for the full year?

Which one of the following taxpayers qualify for the earned income credit?

Arthur is divorced with two dependent children,ages 8 and 13.His adjusted gross income for 2013 is $30,000,and he incurs qualified child care expenses of $6,000,$3,000 for each child. a.What is the amount of Arthur's qualified child care expenses after any limitation? b.Calculate the amount of Arthur's child care credit for 2013.

In calculating the individual AMT,the individual alternative minimum tax liability may not exceed the regular tax liability of the taxpayer.

Jim has foreign income.He earns $25,000 from Country A which taxes the income at a 20 percent rate.He also has income from Country B of $15,000.Country B taxes the $15,000 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?

Clark,a widower,maintains a household for himself and his two dependent preschool children.For the year ended December 31,2013,Clark earned a salary of $36,000.He paid $3,500 to a housekeeper to care for his children in his home,and also paid $1,500 to a kiddie play camp for child care.He had no other income or expenses during 2013.How much can Clark claim as a child care credit in 2013?

The child credit is $1,000 per qualifying child unless it is phased out due to higher levels of parental income.

The child tax credit is not available for children age 17 and older.

Curly and Rita are married,file a joint return,and have two dependent children,ages 11 and 13.Their AGI is $116,000.By how much is their child credit reduced in 2013?

For all taxpayers,except those married filing separately,the individual alternative minimum tax rate for 2013 is 26 percent on the first $179,500 of income and 28 percent on income above $179,500.

A taxpayer with earned income of $50,000 is not eligible to claim the credit for child and dependent care expenses.