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Exam 12: Tax Credits and Payments

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Question 21

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Refundable tax credits include the:

A) Foreign tax credit.
B) Tax credit for rehabilitation expenses.
C) Credit for certain retirement plan contributions.
D) Earned income credit.
E) None of these credits are refundable.

F) D) and E)
G) None of the above

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Question 22

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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.

A) True
B) False

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Question 23

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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 2019 fall semester are as follows: $2,400 tuition, $250 books and course materials, and $1,600 room and board. Abigail's expenses for the 2019 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 reports a combined AGI with his wife Allie of $114,000 for 2019. Determine Bradley's available education tax credit for 2019.

Realizing that providing for a comfortable retirement is up to them, Jim and Julie commit to making regular contributions to their IRAs, beginning this year. Consequently, each makes a $2,000 contribution to his or her traditional IRA. If their AGI is $35,000 on their joint return, what is the amount of their "saver's credit" for certain retirement plan contributions?

Cardinal Corporation hires two persons who are 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:

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 2019, and Arethia is beginning her senior year at Northeast University during fall 2019 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 and Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2019. 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 2019 is:

Phil and Ling, husband and wife, both are employed by Laurel Corporation. Phil earns $135,000 in salary in 2019, and Ling earns $70,000. How much FICA tax must they pay for 2019?

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

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

In January 2019, Tammy acquired an office building in downtown Syracuse, NY, 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 2019. a. Compute Tammy's rehabilitation tax credit for the year of acquisition. b. Determine the cost recovery deduction for 2019. c. What is the basis in the property at the end of its first year of use by Tammy?

All taxpayers are eligible to take the basic research credit.

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:

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

The ceiling amounts and percentages for 2019 for the two portions of the self-employment tax are: Social Security Portion Medicare Portion

Which of the following issues does not need resolution in an employer's effort to comply with employment tax payment requirements?

In computing the foreign tax credit, the greater of the foreign income taxes paid or the overall limitation is allowed.

In the renovation of its building, Green Company incurs $9,000 of expenditures that qualify for the disabled access credit. The disabled access credit is:

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

3 qualified employees × $6,000 limit on wages for each employee × 40% $7,200 = = b. The wage deduction for 2019 is $492,800 [$500,000 (total wages) - $7,200 (credit)]. POINTS: 1 -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: $\begin{array} { l r r } \text { Country } & \text { Income } & \text { Taxes } \\\text { A } & \$ 1,000,000 & \$ 500,000 \\\text { B } & 300,000 & 30,000 \\\text { C } & \underline { 400,000 } & \underline { 120,000 } \\\text { Total } & \underline { \$ 1,700,000 } & \underline { \$ 650,000 }\end{array}$ 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.