Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Amber is in the process this year of renovating the office building (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 $11,000 for various features, such as ramps and widened doorways, to make her office building more accessible. The $11,000 incurred will produce a disabled access credit of what amount?

Accepted Answer

A)  $0 
B)  $5,000 
C)  $5,125 
D)  $5,500 
A)  $0 
B)  $5,000 
C)  $5,125 
D)  $5,500

Question 3

The education tax credits (i.e., the American Opportunity credit and the lifetime learning credit) are available to help defray the cost of higher education regardless of the income level of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

An employer calculates the amount of income tax withheld from salary or wages based on the information an employee provides on the following form:

Accepted Answer

A)  Form W-2. 
B)  Form W-3. 
C)  Form W-4. 
D)  Form 941. 
A)  Form W-2. 
B)  Form W-3. 
C)  Form W-4. 
D)  Form 941.

Question 6

Juan refuses to give the bank where he maintains a savings account his Social Security number. Juan is subject to backup withholding for the interest earned on the savings account.

Accepted Answer

A) True 
 B)False

Question 7

An employer's tax deduction for wages is affected by the work opportunity tax credit.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  The base amounts for 2019 probably will increase from the 2018 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. 
A)  The base amounts for 2019 probably will increase from the 2018 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.

Question 9

Qualifying tuition expenses paid from the proceeds of a tax-exempt scholarship do not give rise to an education tax credit.

Accepted Answer

A) True 
 B)False

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

Bob and Sally are married, file a joint tax return, report AGI of $118,000, and have two children. Del is beginning her freshman year at State College during Fall 2018, and Owen is beginning his senior year at Southwest University during Fall 2018. Owen completed his junior year during the Spring semester of 2017 (i.e., he took a "leave of absence" during the 2017-2018 school year). Both Del and Owen are claimed as dependents on their parents' tax return. Del's qualifying tuition expenses and fees total $5,000 for the Fall semester, while Owen's qualifying tuition expenses were $6,100 for the Fall 2018 semester. Del's room and board costs were $3,200 for the Fall semester. Owen did not incur room and board costs, as he lived with his aunt and uncle during the year.
Full payment is made for the tuition and related expenses for both children at the beginning of each semester. In addition to the children's college expenses, Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist. Bob attended the seminars during July and August 2018. Compute the available education tax credits for Bob and Sally for 2018.

Accepted Answer

A)  $3,100 
B)  $5,000 
C)  $5,480 
D)  $5,600 
A)  $3,100 
B)  $5,000 
C)  $5,480 
D)  $5,600

Question 12

BlueCo incurs $900,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours. The credit for employer-provided child care available to BlueCo this year is $225,000.

Accepted Answer

A) True 
 B)False

Question 13

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. Both children are subject to FICA withholding.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Qualified rehabilitation expenditures include the cost of acquiring the building, but not the cost of acquiring the land.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

During 2018, Barry (who is single and has no children) earned a salary of $13,100. He is age 30. His earned income credit for the year is:

Accepted Answer

A)  $0. 
B)  $176. 
C)  $353. 
D)  $519. 
A)  $0. 
B)  $176. 
C)  $353. 
D)  $519.

Question 18

Which of the following statements regarding the adoption expenses credit is not true?

Accepted Answer

A)  The adoption expenses credit is a nonrefundable credit. 
B)  The adoption expenses credit starts to be phased out in 2018 beginning when a taxpayer's modified AGI exceeds $207,140. 
C)  No adoption expenses credit is a available in 2018 if a taxpayer's modified AGI exceeds $247,140 
D)  The adoption expenses credit is limited to no more than $14,000 per eligible child in 2018. 
E)  All of the above statements are true. 
A)  The adoption expenses credit is a nonrefundable credit. 
B)  The adoption expenses credit starts to be phased out in 2018 beginning when a taxpayer's modified AGI exceeds $207,140. 
C)  No adoption expenses credit is a available in 2018 if a taxpayer's modified AGI exceeds $247,140 
D)  The adoption expenses credit is limited to no more than $14,000 per eligible child in 2018. 
E)  All of the above statements are true.

Question 19

In terms of the withholding procedures, which statement does not reflect current rules?

Accepted Answer

A)  Penalties can be imposed for filing false information with respect to wage withholding. 
B)  An employer need not verify the number of exemptions claimed by an employee on Form W-4 (Employee's Withholding Allowance Certificate). 
C)  An employee may claim fewer than the number of withholding allowances allowed, but not more. 
D)  In preparing the income tax return for the year, the employee is bound by the number of exemptions claimed for withholding purposes. 
A)  Penalties can be imposed for filing false information with respect to wage withholding. 
B)  An employer need not verify the number of exemptions claimed by an employee on Form W-4 (Employee's Withholding Allowance Certificate). 
C)  An employee may claim fewer than the number of withholding allowances allowed, but not more. 
D)  In preparing the income tax return for the year, the employee is bound by the number of exemptions claimed for withholding purposes.

Question 20

The incremental research activities credit is 20% of the qualified research expenses that exceed the base amount.

Accepted Answer

A) True 
 B)False

Exam 12: Tax Credits and Payments

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

The education tax credits (i.e., the American Opportunity credit and the lifetime learning credit) are available to help defray the cost of higher education regardless of the income level of the taxpayer.

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

An employer calculates the amount of income tax withheld from salary or wages based on the information an employee provides on the following form:

Juan refuses to give the bank where he maintains a savings account his Social Security number. Juan is subject to backup withholding for the interest earned on the savings account.

An employer's tax deduction for wages is affected by the work opportunity tax credit.

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

Qualifying tuition expenses paid from the proceeds of a tax-exempt scholarship do not give rise to an education tax credit.

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:

BlueCo incurs $900,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre-school age children during normal working hours. The credit for employer-provided child care available to BlueCo this year is $225,000.

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. Both children are subject to FICA withholding.

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

Qualified rehabilitation expenditures include the cost of acquiring the building, but not the cost of acquiring the land.

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

During 2018, Barry (who is single and has no children) earned a salary of $13,100. He is age 30. His earned income credit for the year is:

Which of the following statements regarding the adoption expenses credit is not true?

In terms of the withholding procedures, which statement does not reflect current rules?

The incremental research activities credit is 20% of the qualified research expenses that exceed the base amount.

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

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