Exam 13: Tax Credits and Payment Procedures

During the year, Green, Inc., incurs the following research expenditures: ​ Green's qualifying research expenditures for the year are:

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

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

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, 2017, her business generates an additional $15,000 general business credit. In 2017, 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 2017 is available for future years?

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?

Several years ago, Sarah purchased a structure for $150,000 that was placed in service in 1929. In the current year, she incurred qualifying rehabilitation expenditures of $200,000. The amount of the tax credit for rehabilitation expenditures, and the amount by which the building's basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts.

Roger is considering making a $6,000 investment in a venture that its promoter promises will generate immediate tax benefits for him. Roger, who does not anticipate itemizing his deductions, is in the 30% marginal income tax bracket. If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure, by how much will Roger's tax liability decline because of the investment?

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.

Summer Corporation's business is international in scope and is subject to income taxes in several countries. Summer's earnings and income taxes paid in the relevant foreign countries are: ​ If Summer Corporation's worldwide income subject to taxation in the United States is $2,400,000 and the U.S. income tax due prior to the foreign tax credit is $816,000, compute the allowable foreign tax credit. If, instead, the total foreign income taxes paid were $550,000, compute the allowable foreign tax credit.

Rick spends $750,000 to build a qualified low-income housing project, which is placed in service on January 1, 2017. He financed the project using his personal funds. What is the amount of the low-income housing credit that Rick may claim in 2017 (assuming a rate of 7.40%)? What is the total amount of the credit that Rick may claim as a result of the $750,000 expenditure?

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.

During the current year, Eleanor earns $120,000 in wages as an employee of an accounting firm. She also earns $13,000 in gross income from an outside consulting service she operates. Deductible expenses paid in connection with the consulting service amount to $3,000. Eleanor also incurs a recognized long-term capital gain of $1,000 from the sale of a stock investment. She must pay a self-employment tax on:

Phil and Audrey, husband and wife, both are employed by Laurel Corporation. Phil earns $125,000 in salary in 2017, and Audrey earns $70,000. How much FICA tax must they pay for 2017?

The child tax credit is based on the number of the taxpayer's qualifying children under age 17.

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

In March 2017, 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 2017. Gray Corporation's work opportunity tax credit amounts for 2016 is:

BlueCo incurs $900,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours. The credit for employer-provided child care available to BlueCo this year is $225,000.

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 2017 fall semester are as follows: $2,400 tuition, $250 books and course materials, and $1,600 room and board. Abigail's expenses for the 2017 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 2017. Determine Bradley's available education tax credit for 2017.

A small employer incurs $1,500 for consulting fees related to establishing a qualified retirement plan for its 75 employees. As a result, the employer may claim the credit for small employer pension plan startup costs for $750.

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.