Question 1

A FIFO method is applied to general business credit carryovers, carrybacks, and utilization of credits earned during a particular year.

Accepted Answer

A) True 
 B)False

Question 2

The purpose of the work opportunity tax credit is to encourage employers to hire individuals from specified target groups traditionally subject to high rates of unemployment.

Accepted Answer

A) True 
 B)False

Question 3

In describing FICA taxes, which (if any) of the following statements is incorrect?

Accepted Answer

A) The base amounts for 2013 probably will increase from the 2012 amounts. 
B) The base amounts for the Social Security and Medicare portions are the same. 
C) If both spouses work, excess FICA taxes need not result. 
D) Excess FICA taxes can be claimed as an income tax credit. 
E) None of the above. 
A) The base amounts for 2013 probably will increase from the 2012 amounts. 
B) The base amounts for the Social Security and Medicare portions are the same. 
C) If both spouses work, excess FICA taxes need not result. 
D) Excess FICA taxes can be claimed as an income tax credit. 
E) None of the above.

Question 4

Several years ago, Sarah purchased a structure for $150,000 that was originally 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:

Accepted Answer

A) $20,000 credit, $180,000 basis. 
B) $20,000 credit, $200,000 basis. 
C) $20,000 credit, $350,000 basis. 
D) $40,000 credit, $160,000 basis. 
E) None of the above. 
A) $20,000 credit, $180,000 basis. 
B) $20,000 credit, $200,000 basis. 
C) $20,000 credit, $350,000 basis. 
D) $40,000 credit, $160,000 basis. 
E) None of the above.

Question 5

A taxpayer who qualifies for the low-income housing credit claims the credit over a 15-year period.

Accepted Answer

A) True 
 B)False

Question 6

How does the FICA tax compare to the self-employment tax? How are these two taxes similar and how do they differ?

Accepted Answer

These taxes, commonly referred to as "pa

Question 7

Which of the following correctly reflects current rules regarding estimated tax payments for individuals?

Accepted Answer

A) Employees are not subject to the estimated tax payment provisions. 
B) Any penalty imposed for underpayment is deductible for income tax purposes. 
C) Married taxpayers may not make joint estimated tax payments unless they file a joint income tax return. 
D) No quarterly payments are required if the taxpayer's estimated tax is under $1,000. 
E) None of the above. 
A) Employees are not subject to the estimated tax payment provisions. 
B) Any penalty imposed for underpayment is deductible for income tax purposes. 
C) Married taxpayers may not make joint estimated tax payments unless they file a joint income tax return. 
D) No quarterly payments are required if the taxpayer's estimated tax is under $1,000. 
E) None of the above.

Question 8

The maximum child tax credit under current law is $1,200 per qualifying child.

Accepted Answer

A) True 
 B)False

Question 9

The tax credit for rehabilitation expenditures for certified historic structures differs from that for qualifying structures that are not certified historic structures.

Accepted Answer

A) True 
 B)False

Question 10

Green Company, in the renovation of its building, incurs $9,000 of expenditures that qualify for the disabled access credit. The disabled access credit is:

Accepted Answer

A) $8,750. 
B) $4,500. 
C) $4,375. 
D) $4,250. 
E) None of the above. 
A) $8,750. 
B) $4,500. 
C) $4,375. 
D) $4,250. 
E) None of the above.

Question 11

For purposes of computing the credit for child and dependent care expenses, the qualifying employment-related expenses are limited to an individual's actual or deemed earned income.

Accepted Answer

A) True 
 B)False

Question 12

In 2011, Juan and Juanita incur $9,800 in legal and adoption fees directly related to the adoption of an infant son born in a nearby state.Over the next year, they incur another $4,500 of adoption expenses.The adoption becomes final in 2012.Which of the following choices properly reflects the amounts and years in which the adoption expenses credit is available. 2011 2012

Accepted Answer

A) $9,800 $ 4,500 
B) None $12,650 
C) None $14,300 
D) $9,800 $ 2,850 
E) None of the above. 
A) $9,800 $ 4,500 
B) None $12,650 
C) None $14,300 
D) $9,800 $ 2,850 
E) None of the above.

Question 13

Which of the following statements is true regarding the education tax credits?

Accepted Answer

A) The lifetime learning credit is available for qualifying tuition and related expenses incurred by students pursuing only graduate degrees. 
B) The American Opportunity credit permits a maximum credit of 20% of qualified expenses up to $10,000 per year. 
C) The American Opportunity credit is calculated per taxpayer, while the lifetime learning credit is available per eligible student. 
D) Continuing education expenses do not qualify for either education credit. 
E) None of the above statements is true. 
A) The lifetime learning credit is available for qualifying tuition and related expenses incurred by students pursuing only graduate degrees. 
B) The American Opportunity credit permits a maximum credit of 20% of qualified expenses up to $10,000 per year. 
C) The American Opportunity credit is calculated per taxpayer, while the lifetime learning credit is available per eligible student. 
D) Continuing education expenses do not qualify for either education credit. 
E) None of the above statements is true.

Question 14

Ahmad is considering making a $5,000 investment in a venture which its promoter promises will generate immediate tax benefits for him.Ahmad, who normally itemizes his deductions, is in the 28% marginal tax bracket.If the investment is of a type where the taxpayer may claim either a tax credit of 25% of the amount of the expenditure or an itemized deduction for the amount of the investment, what treatment normally would be most beneficial to Ahmad and by how much will Ahmad's tax liability decline because of the investment?

Accepted Answer

A) $0, take neither the itemized deduction nor the tax credit. 
B) $1,250, take the tax credit. 
C) $1,400, take the itemized deduction. 
D) Both options produce the same benefit. 
E) None of the above. 
A) $0, take neither the itemized deduction nor the tax credit. 
B) $1,250, take the tax credit. 
C) $1,400, take the itemized deduction. 
D) Both options produce the same benefit. 
E) None of the above.

Question 15

During the year, Purple Corporation (a U.S.Corporation) has U.S.-source income of $900,000 and foreign income of $300,000.The foreign-source income generates foreign income taxes of $75,000.The U.S.income tax before the foreign tax credit is $408,000.Purple Corporation's foreign tax credit is:

Accepted Answer

A) $56,250. 
B) $75,000. 
C) $102,000. 
D) $408,000. 
E) None of the above. 
A) $56,250. 
B) $75,000. 
C) $102,000. 
D) $408,000. 
E) None of the above.

Question 16

Only self-employed individuals are required to make estimated tax payments.

Accepted Answer

A) True 
 B)False

Question 17

During 2012, Eleanor earns $120,000 in wages as an employee of an accounting firm.She also earns $26,000 in gross income from an outside consulting service she operates.Deductible expenses paid in connection with the consulting service amount to $6,000.Eleanor also has a recognized long-term capital gain of $1,000 from the sale of a stock investment.She must pay a self-employment tax on:

Accepted Answer

A) $0. 
B) $20,000. 
C) $26,000. 
D) $27,000. 
E) None of the above. 
A) $0. 
B) $20,000. 
C) $26,000. 
D) $27,000. 
E) None of the above.

Question 18

In May 2008, Cindy incurred qualifying rehabilitation expenditures of $500,000 on a certified historic structure and properly claimed the tax credit for rehabilitation expenditures.In March 2012, she sold the building at a loss.Calculate the rehabilitation expenditures credit recapture that she must report in 2012.

Accepted Answer

@#IMG-DLM& @#IMG-DLM& Because the property was hel

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

Certain high-income individuals are subject to three additional Medicare taxes beginning in 2013-on wages, unearned income, and tax credits claimed.

Accepted Answer

A) True 
 B)False

Exam 12: Tax Credits and Payments

A FIFO method is applied to general business credit carryovers, carrybacks, and utilization of credits earned during a particular year.

The purpose of the work opportunity tax credit is to encourage employers to hire individuals from specified target groups traditionally subject to high rates of unemployment.

In describing FICA taxes, which (if any) of the following statements is incorrect?

A taxpayer who qualifies for the low-income housing credit claims the credit over a 15-year period.

How does the FICA tax compare to the self-employment tax? How are these two taxes similar and how do they differ?

Which of the following correctly reflects current rules regarding estimated tax payments for individuals?

The maximum child tax credit under current law is $1,200 per qualifying child.

The tax credit for rehabilitation expenditures for certified historic structures differs from that for qualifying structures that are not certified historic structures.

Green Company, in the renovation of its building, incurs $9,000 of expenditures that qualify for the disabled access credit. The disabled access credit is:

For purposes of computing the credit for child and dependent care expenses, the qualifying employment-related expenses are limited to an individual's actual or deemed earned income.

Which of the following statements is true regarding the education tax credits?

During the year, Purple Corporation (a U.S.Corporation) has U.S.-source income of $900,000 and foreign income of $300,000.The foreign-source income generates foreign income taxes of $75,000.The U.S.income tax before the foreign tax credit is $408,000.Purple Corporation's foreign tax credit is:

Only self-employed individuals are required to make estimated tax payments.

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.

Certain high-income individuals are subject to three additional Medicare taxes beginning in 2013-on wages, unearned income, and tax credits claimed.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S: Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

Filters