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Exam 13: Tax Credits and Payment Procedures

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Question 1

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The additional Medicare taxes assessed on high-income individuals carry differing tax rates depending on the tax base.

A) True
B) False

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Question 2

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Ahmad is considering making a $10,000 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?

A) $0,take neither the itemized deduction nor the tax credit.
B) $2,500,take the tax credit.
C) $2,800,take the itemized deduction.
D) Both options produce the same benefit.
E) None of these.

F) A) and E)
G) B) and E)

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Question 3

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Sam and Betty are married,have four dependent children,and both are employed.For withholding purposes,they may allocate their total allowances between themselves as they see fit.

Kevin and Sue have two children,ages 8 and 14.They spend $6,200 per year on eligible employment related expenses for the care of their children after school.Kevin earned a salary of $20,000 and Sue earned a salary of $18,000.What is the amount of the credit for child and dependent care expenses?

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

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

Cardinal Company incurs $800,000 during the year to construct a facility that will be used exclusively for the care of its employees' pre­school 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 $640,000.

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

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

If a taxpayer is required to recapture any tax credit for rehabilitation expenditures,the recapture amount need not be added to the adjusted basis of the rehabilitation expenditures.

Molly has generated general business credits over the years that have not been utilized.The amounts generated and not utilized follow: $\begin{array}{rr}2010 & \$ 2,500 \\2011 & 7,500 \\2012 & 5,000 \\2013 & 4,000\end{array}$ In the current year,2014,her business generates an additional $15,000 general business credit.In 2014,based on her tax liability before credits,she can utilize a general business credit of up to $20,000.After utilizing the carryforwards and the current year credits,how much of the general business credit generated in 2014 is available for future years?

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

Cheryl is single,has one child (age 6) ,and files as head of household during 2014.Her salary for the year is $19,500.She qualifies for an earned income credit of the following amount:

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

Which of the following statements concerning the credit for child and dependent care expenses is not correct?

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

The low-income housing credit is available to low-income tenants who reside in qualifying low-income housing.

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

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

Bradley has two college-age children,Clint,a freshman at State University,and Abigail,a junior at Northwest University.Both Clint and Abigail are full­time students.Clint's expenses during the 2014 fall semester are as follows: $2,400 tuition,$250 books and course materials,and $1,600 room and board.Abigail's expenses for the 2014 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 2014.Determine Bradley's available education tax credit for 2014.