Exam 6: Credits and Special Taxes

If the net unearned income of a minor child is to be taxed at the parents' tax rate, the parents may elect, under certain conditions, to include the child's gross income on their tax return.

Lee and Pat are married taxpayers living in Louisiana. Lee earns wages of $40,000 and has $5,000 of dividend income from separate property. Lee and Pat have interest income from community property of $10,000. If Lee and Pat file separate income tax returns, what amount of income must be included on Lee's separate tax return?

​Which of the following is not a requirement to claim an earned income credit? a.​Social Security number b.​At least one child claimed as a dependent c.​At least $1 of earned income d.​US citizenship or resident alien status

In 2016, Brady purchases a 2016 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?

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

Glen and Mary have two children, Chad, age 12, and Linda, age 8. For 2016, Chad has $4,000 in net unearned income and Linda has net unearned income of $1,000. If the total parental tax for 2016 is $1,500, how would the tax be allocated between Chad and Linda?

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

The American Opportunity tax credit

Clark, a widower, maintains a household for himself and his two dependent preschool children. For the year ended December 31, 2016, Clark earned a salary of $32,000. He paid $3,600 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 2016. How much can Clark claim as a child and dependent care credit in 2016?

Most states are community property states.

In 2016, which of the following children would have income taxed at their parents' rates?

Hal is enrolled for one class at a local community college; tuition cost him $190. Hal's AGI is $20,000. Hal can take a lifetime learning credit of:

Taxpayers are required to wait until they file their tax return to receive the premium tax credit. ​

John graduates from high school in 2016 and enrolls in a private college in the fall. His parents pay $10,000 for his tuition and fees. a.Assuming John's parents have AGI of $46,000, what is the American Opportunity credit they can claim for John? Explain. b.Assuming John's parents have AGI of $175,000, what is the American Opportunity credit they can claim for John? Explain.

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?

​Caprice is a single 42-year-old with income of $12,000 in 2016. She lacked minimum essential coverage for 7 months in 2016. What is her individual shared responsibility payment amount?

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:

Net unearned income of certain minor children is taxed at their parents' tax rates.

​Household income for purpose of the individual shared responsibility payment includes all of the following except:

William and Irma have two children, Tom, age 13, and Sara, age 8. For 2016, Tom and Sara have a total parental tax of $5,600. Tom's net unearned income is $5,000, while Sara's net unearned income is $15,000. How much of the parental tax would be allocated to Sara on her 2016 tax return?