Exam 13: Tax Credits and Payment Procedures

Bradley has two college-age children,Clint,a freshman at State University,and Abigail,a junior at Northwest University.Both Clint and Abigail are full-time students.Clint's expenses during the 2016 fall semester are as follows: $2,400 tuition,$250 books and course materials,and $1,600 room and board.Abigail's expenses for the 2016 calendar year are as follows: $10,200 tuition,$1,200 books and course materials,and $3,600 room and board.Tuition and the applicable room and board costs are paid at the beginning of each semester. ​ Bradley is married,files a joint tax return,claims both children as dependents,and reports a combined AGI with his wife Allie of $114,000 for 2016.Determine Bradley's available education tax credit for 2016.

Identify the statement below that is false.

Juan refuses to give the bank where he maintains a savings account his Social Security number.Juan is subject to backup withholding for the interest earned on the savings account.

Several years ago,Tom purchased a structure for $300,000 that was 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.

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

The work opportunity tax credit is available only for wages paid to qualifying individuals during their first year of employment.

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

Molly has generated general business credits over the years that have not been utilized.The amounts generated and not utilized follow: 2012 $2,500 2013 7,500 2014 5,000 2015 4,000 ​ In the current year,2016,her business generates an additional $15,000 general business credit.In 2016,based on her tax liability before credits,she can utilize a general business credit of up to $20,000.After utilizing the carryforwards and the current year credits,how much of the general business credit generated in 2016 is available for future years?

Dabney and Nancy are married,both gainfully employed,and have two children who are 3 and 6 years old.Dabney's salary is $35,000 while Nancy's salary is $40,000.During the year,they spend $7,000 for child care expenses that are required so both of them can work outside of the home.Calculate the credit for child and dependent care expenses.

In May 2012,Cindy incurred qualifying rehabilitation expenditures of $500,000 on a certified historic structure and properly claimed the tax credit for rehabilitation expenditures.In March 2016,she sold the building at a loss.Calculate the rehabilitation expenditures credit recapture that she must report in 2016.

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.

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

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.

Expenses that are reimbursed by a taxpayer's employer under a dependent care assistance program can also qualify for the credit for child and dependent care expenses.

On October 2,Ross quits his job with Blue Corporation.If requested by Ross,Blue Corporation must furnish a Form W-2 to Ross within 45 days after the date of the request or the final wage payment,whichever is later.

An individual generally may claim a credit for adoption expenses in the year in which the expenses are paid.

In March 2016,Gray Corporation hired two individuals,both of whom were certified as long-term recipients of family assistance benefits.Each employee was paid $11,000 during 2016.Only one of the individuals continued to work for Gray Corporation in 2017,earning $9,000 during the year.No additional workers were hired in 2017.Gray Corporation's work opportunity tax credit amounts for 2016 and 2017 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.Both children are subject to FICA withholding.

The tax benefit received from a tax credit is never affected by the tax rate of the taxpayer.

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.