Question 1

Qualified research and experimentation expenditures are not only eligible for the 20% tax credit,but also can be expensed in the year incurred.

Accepted Answer

A) True 
 B)False

Question 2

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.

Accepted Answer

A) True 
 B)False

Question 3

Refundable tax credits include the:

Accepted Answer

A) Foreign tax credit. 
B) Tax credit for rehabilitation expenses. 
C) Credit for certain retirement plan contributions. 
D) Earned income credit. 
E) None of the above. 
A) Foreign tax credit. 
B) Tax credit for rehabilitation expenses. 
C) Credit for certain retirement plan contributions. 
D) Earned income credit. 
E) None of the above.

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

Susan generated $55,000 of net earnings from the conduct of a tax preparation business that she operated during the tax-filing season.She also received wages of $77,000 from her full-time job.Compute the self-employment taxes due for 2017.

Accepted Answer

Self-employment earn

Question 6

An employee with outside income may be able to avoid the penalty for underpayment of estimated tax by having his employer increase income tax withholdings.

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

A) $0 
B) $24,000 
C) $36,000 
D) $48,000 
E) None of the above 
A) $0 
B) $24,000 
C) $36,000 
D) $48,000 
E) None of the above

Question 8

A taxpayer's earned income credit is dependent on the number of his or her qualifying children.

Accepted Answer

A) True 
 B)False

Question 9

Cheryl is single,has one child (age 6),and files as head of household during 2016.Her salary for the year is $19,500.She qualifies for an earned income credit of the following amount.

Accepted Answer

A) $0. 
B) $3,115. 
C) $3,215. 
D) $3,400. 
A) $0. 
B) $3,115. 
C) $3,215. 
D) $3,400.

Question 10

During the year,Green Corporation (a U.S.corporation) has U.S.-source income of $750,000 and foreign income of $500,000.The foreign-source income generates foreign income taxes of $240,000.The U.S.income tax before the foreign tax credit is $425,000.Green Corporation's foreign tax credit is:

Accepted Answer

A) $170,000. 
B) $240,000. 
C) $425,000. 
D) $500,000. 
A) $170,000. 
B) $240,000. 
C) $425,000. 
D) $500,000.

Question 11

In 2016,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 2017.Which of the following choices properly reflects the amounts and years in which the adoption expenses credit is available.
2016 2017

Accepted Answer

A) $9,800 $ 4,500 
B) None $13,570 
C) None $14,300 
D) $9,800 $ 3,770 
A) $9,800 $ 4,500 
B) None $13,570 
C) None $14,300 
D) $9,800 $ 3,770

Question 12

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.

Accepted Answer

A) True 
 B)False

Question 13

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.

Accepted Answer

For two or more qualifying children,the

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The maximum child tax credit under current law is $1,500 per qualifying child.

Accepted Answer

A) True 
 B)False

Question 16

George and Martha are married and file a joint tax return claiming their two children,ages 10 and 8 as dependents.Assuming their AGI is $119,650,George and Martha's child tax credit is:

Accepted Answer

A) $0. 
B) $1,000. 
C) $1,500. 
D) $2,000. 
A) $0. 
B) $1,000. 
C) $1,500. 
D) $2,000.

Question 17

Ahmad is considering making a $10,000 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) $2,500, take the tax credit. 
C) $2,800, 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) $2,500, take the tax credit. 
C) $2,800, take the itemized deduction. 
D) Both options produce the same benefit. 
E) None of the above.

Question 18

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

Accepted Answer

A) True 
 B)False

Exam 12: Tax Credits and Payments

Qualified research and experimentation expenditures are not only eligible for the 20% tax credit,but also can be expensed in the year incurred.

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.

Refundable tax credits include the:

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.

Susan generated $55,000 of net earnings from the conduct of a tax preparation business that she operated during the tax-filing season.She also received wages of $77,000 from her full-time job.Compute the self-employment taxes due for 2017.

An employee with outside income may be able to avoid the penalty for underpayment of estimated tax by having his employer increase income tax withholdings.

A taxpayer's earned income credit is dependent on the number of his or her qualifying children.

Cheryl is single,has one child (age 6),and files as head of household during 2016.Her salary for the year is $19,500.She qualifies for an earned income credit of the following amount.

During the year,Green Corporation (a U.S.corporation) has U.S.-source income of $750,000 and foreign income of $500,000.The foreign-source income generates foreign income taxes of $240,000.The U.S.income tax before the foreign tax credit is $425,000.Green Corporation's foreign tax credit is:

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.

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

The maximum child tax credit under current law is $1,500 per qualifying child.

George and Martha are married and file a joint tax return claiming their two children,ages 10 and 8 as dependents.Assuming their AGI is $119,650,George and Martha's child tax credit is:

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

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

Property Transactions, capital Gains and Losses, sec1231, and 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 Reorganization

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters