Exam 12: Tax Credits and Payments

Roger is considering making a $3,000 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?

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.Only the son is subject to FICA withholding.

Cardinal Corporation hires two persons certified to be eligible employees for the work opportunity tax credit under the general rules (e.g. ,food stamp recipients),each of whom is paid $15,000 during the year.As a result of this event,Cardinal Corporation may claim a work opportunity credit of:

The ceiling amounts and percentages for 2010 for the two portions of the self-employment tax are: Social Security portion Medicare portion

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:

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

Which of the following statements concerning the credit for child and dependent care expenses is not correct?

In 2009,Juan and Juanita incur $7,800 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 2010.Which of the following choices properly reflects the amounts and years in which the adoption expenses credit is available. 2009 2010

Child and dependent care expenses include amounts paid for general household services.

Amber is in the process this year of renovating the office building (originally placed in service in 1976)used by her business.Because of current Federal Regulations that require the structure to be accessible to handicapped individuals,she incurs an additional $18,000 for various features,such as ramps and widened doorways,to make her office building more accessible.The $18,000 incurred will produce a disabled access credit of what amount?

Rick spends $600,000 to build a qualified low-income housing project,which is placed in service on January 1,2010.He financed the project using his personal funds.What is the amount of the low-income housing credit that Rick may claim in 2010 (assuming a rate of 7.65%)? What is the total amount of the credit that Rick may claim as a result of the $600,000 expenditure?

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

The earned income credit is available only if the taxpayer has at least one qualifying child in the household.

Several years ago,Sarah purchased a structure for $300,000 that was originally placed in service in 1929.In the current year,she incurred qualifying rehabilitation expenditures of $400,000.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:

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

Employers are encouraged by the work opportunity tax credit to hire individuals who have been long-term recipients of family assistance welfare benefits.

Only certain taxpayers are eligible to take the basic research credit.

Explain the purpose of the disabled access credit and describe the general characteristics of its computation.

The disabled access credit was enacted to encourage small businesses to make their businesses more accessible to disabled individuals.

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.