Question 1

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

Accepted Answer

A)  A taxpayer is not allowed both an exclusion from income and the credit for child and dependent care expenses on the same amount. 
B)  A taxpayer is not allowed both a deduction as a medical expense and the credit for child and dependent care expenses on the same amount. 
C)  If a taxpayer's adjusted gross income exceeds $43,000, the rate for the credit for child and dependent care expenses is 20%. 
D)  If a taxpayer's adjusted gross income exceeds $15,000 but is not over $17,000, the rate for the credit for child and dependent care expenses is 35%. 
E)  All of the above statements are correct. 
A)  A taxpayer is not allowed both an exclusion from income and the credit for child and dependent care expenses on the same amount. 
B)  A taxpayer is not allowed both a deduction as a medical expense and the credit for child and dependent care expenses on the same amount. 
C)  If a taxpayer's adjusted gross income exceeds $43,000, the rate for the credit for child and dependent care expenses is 20%. 
D)  If a taxpayer's adjusted gross income exceeds $15,000 but is not over $17,000, the rate for the credit for child and dependent care expenses is 35%. 
E)  All of the above statements are correct. D

Question 2

The maximum credit for child and dependent care expenses is $2,100 if only one spouse is employed and the other spouse is a full-time student.

Accepted Answer

A) True 
 B)False  True

Question 3

A taxpayer who qualifies for the low-income housing credit claims the credit over a 20-year period.

Accepted Answer

A) True 
 B)False  False

Question 4

If an employee holds two jobs during the year, an overwithholding of FICA tax always will result.

Accepted Answer

A) True 
 B)False

Question 5

Unused foreign tax credits can be carried back three years and forward fifteen years.

Accepted Answer

A) True 
 B)False

Question 6

Pat generated self-employment income in 2018 of $76,000. The self-employment tax is:

Accepted Answer

A)  $0. 
B)  $5,369.23. 
C)  $10,738.46. 
D)  $11,628.00. 
A)  $0. 
B)  $5,369.23. 
C)  $10,738.46. 
D)  $11,628.00.

Question 7

Cheryl is single, has one child (age 6), and files as head of household during 2018. Her salary for the year is $19,500. She qualifies for an earned income credit of the following amount.

Accepted Answer

A)  $0. 
B)  $3,298. 
C)  $3,327. 
D)  $3,461. 
A)  $0. 
B)  $3,298. 
C)  $3,327. 
D)  $3,461.

Question 8

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 $9,000 during the year. As a result of this event, Cardinal Corporation may claim a work opportunity credit of:

Accepted Answer

A)  $1,440. 
B)  $2,880. 
C)  $4,800. 
D)  $7,200. 
E)  None of the above. 
A)  $1,440. 
B)  $2,880. 
C)  $4,800. 
D)  $7,200. 
E)  None of the above.

Question 9

The low-income housing credit is available to low-income tenants who reside in qualifying low-income housing.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Steve records a tentative general business credit of $110,000 for the current year. His net regular tax liability before t general business credit is $125,000, and his tentative minimum tax is $100,000. Compute Steve's allowable general business credit for the year.

Accepted Answer

Steve's allowable general business credi

Question 12

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 13

In the event that overwithholding of FICA tax occurs because the taxpayer has more than one employer, the excess amount should be claimed as a credit on the Federal income tax return of the employee.

Accepted Answer

A) True 
 B)False

Question 14

In 2018, 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)  $2,000. 
C)  $3,000. 
D)  $4,000. 
A)  $0. 
B)  $2,000. 
C)  $3,000. 
D)  $4,000.

Question 15

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 16

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 17

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

Accepted Answer

A) True 
 B)False

Question 18

In January 2018, Tammy acquired an office building in downtown Syracuse, New York for $400,000. The building was constructed in 1932 and is a certified historic structure. Of the $400,000 cost, $40,000 was allocated to the land.
Tammy immediately placed the building into service, but she quickly realized that substantial renovation would be required to keep and attract new tenants. The renovations, costing $600,000, were of the type that qualifies for the rehabilitation credit. The improvements were completed in October 2018.
a. Compute Tammy's rehabilitation tax credit for the year of acquisition.
b. Determine the cost recovery deduction for 2018.
c. What is the basis in the property at the end of its first year of use by Tammy?

Accepted Answer

The answer of In January 2018, Tammy acquired an office...

Question 19

The ceiling amounts and percentages for 2018 for the two portions of the self-employment tax are:

Accepted Answer

The answer of The ceiling amounts and percentages for 2018...

Question 20

A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is under age 17.

Accepted Answer

A) True 
 B)False

Exam 12: Tax Credits and Payments

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

The maximum credit for child and dependent care expenses is $2,100 if only one spouse is employed and the other spouse is a full-time student.

A taxpayer who qualifies for the low-income housing credit claims the credit over a 20-year period.

If an employee holds two jobs during the year, an overwithholding of FICA tax always will result.

Unused foreign tax credits can be carried back three years and forward fifteen years.

Pat generated self-employment income in 2018 of $76,000. The self-employment tax is:

Cheryl is single, has one child (age 6), and files as head of household during 2018. Her salary for the year is $19,500. She qualifies for an earned income credit of the following amount.

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 $9,000 during the year. As a result of this event, Cardinal Corporation may claim a work opportunity credit of:

The low-income housing credit is available to low-income tenants who reside in qualifying low-income housing.

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

Steve records a tentative general business credit of $110,000 for the current year. His net regular tax liability before t general business credit is $125,000, and his tentative minimum tax is $100,000. Compute Steve's allowable general business credit for the 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 the event that overwithholding of FICA tax occurs because the taxpayer has more than one employer, the excess amount should be claimed as a credit on the Federal income tax return of the employee.

In 2018, 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:

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.

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

The ceiling amounts and percentages for 2018 for the two portions of the self-employment tax are:

A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is under age 17.

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, Section 1231, and Recapture Provisions

Taxing Business Income

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

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters