Exam 12: Tax Credits and Payments

In 2017, 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 2018. Which of the following choices properly reflects the amounts and years in which the adoption expenses credit is available.

During the current year, Eleanor earns $120,000 in wages as an employee of an accounting firm. She also earns $13,000 in gross income from an outside consulting service she operates. Deductible expenses paid in connection with the consulting service amount to $3,000. Eleanor also incurs a recognized long-term capital gain of $1,000 from the sale of a stock investment. She must pay a self-employment tax on:

Only married taxpayers with children are qualified to receive the earned income credit.

In March 2018, Gray Corporation hired two individuals, both of whom were certified as long-term recipients of family assistance benefits. Each employee was paid $11,000 during 2018. Gray Corporation's work opportunity tax credit amounts for 2018 is:

Golden Corporation is an eligible small business for purposes of the disabled access credit. During the year, Golden makes the following expenditures on a structure originally placed in service in 1988. In addition, $8,000 was expended by Golden on a building originally placed in service in the current year to ensure easy accessibility by disabled individuals. Calculate the amount of the disabled access credit available to Golden Corporation.

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

Summer Corporation's business is international in scope and is subject to income taxes in several countries. Summer's earnings and income taxes paid in the relevant foreign countries are: If Summer Corporation's worldwide income subject to taxation in the United States is $2,400,000 and the U.S. income tax due prior to the foreign tax credit is $504,000, compute the allowable foreign tax credit. If, instead, the total foreign income taxes paid were $250,000, compute the allowable foreign tax credit.

The tax benefits resulting from tax credits and tax deductions are affected by the tax rate bracket of the taxpayer.

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.

Which, if any, of the following correctly describes the research activities credit?

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.

Jermaine and Kesha are married, file a joint tax return, have AGI of $82,500, and have two children. Devona is beginning her freshman year at State University during Fall 2018, and Arethia is beginning her senior year at Northeast University during Fall 2018 after having completed her junior year during the spring of that year. Both Devona and Arethia are claimed as dependents on their parents' tax return. Devona's qualifying tuition expenses and fees total $4,000 for the fall semester, while Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2018. Full payment is made for the tuition and related expenses for both children during each semester. The American Opportunity credit available to Jermaine and Kesha for 2018 is:

Nonrefundable credits are those that reduce the taxpayer's tax liability but are not paid when the amount of the credit (or credits) exceeds the taxpayer's tax liability.

Both education tax credits are available for qualified tuition expenses, and in certain instances, also may be available for room and board.

Rick spends $750,000 to build a qualified low-income housing project, which is placed in service on January 1, 2018. He financed the project using his personal funds. What is the amount of the low-income housing credit that Rick may claim in 2018 (assuming a rate of 7.40%)? What is the total amount of the credit that Rick may claim as a result of the $750,000 expenditure?

The components of the general business credit include all of the following except:

Jack and Jill are married, have three children, and they report earnings during 2018 of $28,500. Do they qualify for the earned income credit? If so, calculate the amount of credit that is available to them.

The disabled access credit is computed at the rate of 50% of all access expenditures incurred by the taxpayer during the year.

Black Company paid wages of $180,000, of which $40,000 was qualified wages for the work opportunity tax credit under the general rules. Black Company's deduction for wages for the year is:

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.