Question 1

If a taxpayer chooses not to claim a foreign tax credit,the foreign income taxes paid can be claimed as a deduction.

Accepted Answer

A) True 
 B)False  True

Question 2

Molly has generated general business credits over the years that have not been utilized.The amounts generated and not utilized follow:  In the current year,2010,her business generates an additional $30,000 general business credit.In 2010,based on her tax liability before credits,she can utilize a general business credit of up to $40,000.After utilizing the carryforwards and the current year credits,how much of the general business credit generated in 2010 is available for future years?

Accepted Answer

A)  $0.
B)  $2,000.
C)  $23,000.
D)  $28,000.
E)  None of the above. D

Question 3

Several years ago,Tom purchased a structure for $150,000 that was originally placed in service in 1929.Three and one-half years ago he incurred qualifying rehabilitation expenditures of $300,000.In the current year,Tom sold the property in a taxable transaction.Calculate the amount of the recapture of the tax credit for rehabilitation expenditures.

Accepted Answer

A)  $0.
B)  $12,000.
C)  $18,000.
D)  $24,000.
E)  None of the above. B

Question 4

Pat generated self-employment income in 2010 of $70,000.The self-employment tax is:

Accepted Answer

A)  $0.
B)  $5,355.00.
C)  $9,890.69.
D)  $10,710.00.
E)  None of the above.

Question 5

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 6

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 7

Any unused general business credit must be carried back 1 year and then forward for 15 years.

Accepted Answer

A) True 
 B)False

Question 8

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.

Accepted Answer

A) True 
 B)False

Question 9

If a taxpayer is required to recapture any tax credit for rehabilitation expenditures,the recapture amount must be added to the adjusted basis of the rehabilitation expenditures.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  The research activities credit is the greater of the incremental research credit,the basic research credit,or the energy research credit.
B)  If the research activities credit is claimed,no deduction is allowed for research and experimentation expenditures.
C)  The credit is not available for research conducted outside the United States.
D)  All corporations qualify for the basic research credit.
E)  None of the above.

Question 11

The tax benefit received from a tax credit is affected by the tax rate of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 12

Cardinal Company incurs $500,000 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.Assuming Cardinal claims the credit for employer-provided child care this year,its basis in the newly constructed facility is $375,000.

Accepted Answer

A) True 
 B)False

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

Bradley has two college-age children,Clint,a freshman at State University,and Abigail,a junior at Northwest University.Both Clint and Abigail are full-time students.Clint's expenses during the 2010 fall semester are as follows: $2,400 tuition,$250 books and course materials,and $1,600 room and board.Abigail's expenses for the 2010 calendar year are as follows: $10,200 tuition,$1,200 books and course materials,and $3,600 room and board.Tuition and the applicable room and board costs are paid at the beginning of each semester.Bradley is married,files a joint tax return,claims both children as dependents,and has a combined AGI with his wife of $114,000 for 2010.Determine Bradley's available education tax credit for 2010.

Accepted Answer

The answer of Bradley has two college-age children,Clint,a freshman at...

Question 15

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 2010.

Accepted Answer

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

Question 16

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 17

Income tax withheld on wages is an example of a refundable credit.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  The base amounts for 2011 probably will increase from the 2010 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

For the current year,the base amount for the Social Security portion (old age,survivors,and disability insurance)is different from that for the Medicare portion of FICA.

Accepted Answer

A) True 
 B)False

Exam 12: Tax Credits and Payments

If a taxpayer chooses not to claim a foreign tax credit,the foreign income taxes paid can be claimed as a deduction.

Pat generated self-employment income in 2010 of $70,000.The self-employment tax is:

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

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.

Any unused general business credit must be carried back 1 year and then forward for 15 years.

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.

If a taxpayer is required to recapture any tax credit for rehabilitation expenditures,the recapture amount must be added to the adjusted basis of the rehabilitation expenditures.

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

The tax benefit received from a tax credit is affected by the tax rate 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.

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 2010.

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

Income tax withheld on wages is an example of a refundable credit.

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

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

For the current year,the base amount for the Social Security portion (old age,survivors,and disability insurance)is different from that for the Medicare portion of FICA.