Question 1

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 $60,000 from her full-time job.Compute the self-employment taxes due for 2012.

Accepted Answer

The answer of Susan generated $55,000 of net earnings from...

Question 2

BlueCo incurs $700,000 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 $175,000.

Accepted Answer

A) True 
 B)False

Question 3

An individual generally may claim a credit for adoption expenses in the year in which the expenses are paid.

Accepted Answer

A) True 
 B)False

Question 4

During 2012, Barry (who is single and has no children) earned a salary of $13,000.He is age 30.His earned income credit for the year is:

Accepted Answer

A) $0. 
B) $75. 
C) $400. 
D) $475. 
E) None of the above.

Question 5

Harry and Wilma are married and file a joint income tax return. On their tax return, they report $44,000 of adjusted gross income ($20,000 salary earned by Harry and $24,000 salary earned by Wilma) and claim two exemptions for their dependent children. During the year, they pay the following amounts to care for their 4-year old son and 6-year old daughter while they work.  Harry and Wilma may claim a credit for child and dependent care expenses of:

Accepted Answer

A) $840. 
B) $1,040. 
C) $1,200. 
D) $1,240. 
E) None of the above.

Question 6

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. 
E) None of the above.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

For purposes of computing the credit for child and dependent care expenses, the qualifying employment-related expenses are limited to an individual's actual or deemed earned income.

Accepted Answer

A) True 
 B)False

Question 9

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 2012 beginning when a taxpayer's modified AGI exceeds $189,710. 
C) No adoption expenses credit is a available in 2012 if a taxpayer's modified AGI exceeds $229,710. 
D) The adoption expenses credit is limited to no more than $13,360 per eligible child in 2012. 
E) All of the above statements are true.

Question 10

If a taxpayer chooses to claim a foreign tax credit, part of the foreign income taxes paid can also be claimed as a deduction.

Accepted Answer

A) True 
 B)False

Question 11

The tax credit for rehabilitation expenditures for certified historic structures differs from that for qualifying structures that are not certified historic structures.

Accepted Answer

A) True 
 B)False

Question 12

Rex and Dena are married and have two children, Michelle (age 7) and Nancy (age 5).During 2012, Rex earned a salary of $24,000, received interest income of $300, and filed a joint income tax return.Dena had $0 gross income.Their earned income credit for the year is:

Accepted Answer

A) $0. 
B) $421. 
C) $4,815. 
D) $5,236. 
E) None of the above.

Question 13

Which of the following correctly describes the tax credit for rehabilitation expenditures?

Accepted Answer

A) The cost of enlarging any existing business building is a qualifying expenditure. 
B) The cost of facilities related to the building (e.g., a parking lot) is a qualifying expenditure. 
C) No recapture provisions apply. 
D) No credit is allowed for the rehabilitation of personal use property. 
E) None of the above.

Question 14

The American Opportunity credit is available per eligible student, while the lifetime learning credit is calculated per taxpayer.

Accepted Answer

A) True 
 B)False

Question 15

A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is age 13 or less.

Accepted Answer

A) True 
 B)False

Question 16

The ceiling amounts and percentages for 2012 for the two portions of the self-employment tax are: Social Security portion Medicare portion

Accepted Answer

A) $110,100; 13.3% Unlimited; 2.9% 
B) $110,100; 12.4% Unlimited; 2.9% 
C) $110,100; 10.4% Unlimited; 2.9% 
D) $110,100; 10.4% Unlimited; 13.3% 
E) None of the above.

Question 17

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.

Question 18

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:

Accepted Answer

A) $56,250. 
B) $75,000. 
C) $102,000. 
D) $408,000. 
E) None of the above.

Question 19

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

Accepted Answer

A) The base amounts for 2013 probably will increase from the 2012 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. 
E) None of the above.

Question 20

Ahmad is considering making a $5,000 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) $1,250, take the tax credit. 
C) $1,400, take the itemized deduction. 
D) Both options produce the same benefit. 
E) None of the above.

Exam 12: Tax Credits and Payments

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 $60,000 from her full-time job.Compute the self-employment taxes due for 2012.

BlueCo incurs $700,000 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 $175,000.

An individual generally may claim a credit for adoption expenses in the year in which the expenses are paid.

During 2012, Barry (who is single and has no children) earned a salary of $13,000.He is age 30.His earned income credit for the year is:

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:

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

For purposes of computing the credit for child and dependent care expenses, the qualifying employment-related expenses are limited to an individual's actual or deemed earned income.

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

If a taxpayer chooses to claim a foreign tax credit, part of the foreign income taxes paid can also be claimed as a deduction.

The tax credit for rehabilitation expenditures for certified historic structures differs from that for qualifying structures that are not certified historic structures.

Rex and Dena are married and have two children, Michelle (age 7) and Nancy (age 5) .During 2012, Rex earned a salary of $24,000, received interest income of $300, and filed a joint income tax return.Dena had $0 gross income.Their earned income credit for the year is:

Which of the following correctly describes the tax credit for rehabilitation expenditures?

The American Opportunity credit is available per eligible student, while the lifetime learning credit is calculated per taxpayer.

A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is age 13 or less.

The ceiling amounts and percentages for 2012 for the two portions of the self-employment tax are: Social Security portion Medicare portion

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

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