Question 1

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

Accepted Answer

The answer of Which,if any,of the following correctly describes the...

Question 2

Several years ago,Sarah purchased a structure for $150,000 that was placed in service in 1929.In the current year,she incurred qualifying rehabilitation expenditures of $200,000.The amount of the tax credit for rehabilitation expenditures,and the amount by which the building's basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts.

Accepted Answer

The answer of Several years ago,Sarah purchased a structure for...

Question 3

Which of the following best describes the treatment applicable to unused business credits?

Accepted Answer

The answer of Which of the following best describes the...

Question 4

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:

Accepted Answer

The disabled access credit is equal to 50% of eligible access expenditures over $250 and up to $10,250, so in this case, the credit would be 50% x ($9,000 - $250) = $4,375. Therefore, the best choice is C.

Question 5

In March 2016,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 2016.Only one of the individuals continued to work for Gray Corporation in 2017,earning $9,000 during the year.No additional workers were hired in 2017.Gray Corporation's work opportunity tax credit amounts for 2016 and 2017 are:

Accepted Answer

The work opportunity tax credit is a tax credit for employers who hire individuals from certain targeted groups, including long-term recipients of family assistance benefits. The credit is equal to 40% of the first $6,000 of wages paid to each eligible employee. In 2016, Gray Corporation hired two eligible employees and paid each of them $11,000. Therefore, Gray Corporation's work opportunity tax credit for 2016 is $8,000 (2 x $4,000). In 2017, only one of the eligible employees continued to work for Gray Corporation and earned $9,000. Therefore, Gray Corporation's work opportunity tax credit for 2017 is $4,500 (1 x $4,500).

Question 6

Which,if any,of the following correctly describes the earned income credit?

Accepted Answer

The earned income credit is a refundable credit, meaning that if the credit exceeds the amount of taxes owed, the taxpayer can receive the excess as a refund. Option A is incorrect because the amount of the credit decreases as adjusted gross income increases. Option B is incorrect because a surviving spouse can qualify for the earned income credit. Option C is partially correct, as the taxpayer must have a qualifying child to claim the maximum credit, but there is also a smaller credit available for taxpayers without qualifying children.

Question 7

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

Accepted Answer

All of the listed options are components of the general business credit, so none of them are excluded.

Question 8

During the year,Green,Inc. ,incurs the following research expenditures:
In-house wages,supplies,computer time
$60,000
Paid to Blue Foundation for research
30,000
​
Green's qualifying research expenditures for the year are:

Accepted Answer

Green, Inc's qualifying research expenditures for the year are the sum of the in-house wages, supplies, and computer time plus 65% of the amount paid to Blue Foundation for research.

Qualifying research expenditures = (in-house wages + supplies + computer time) + (65% of amount paid to Blue Foundation)

Qualifying research expenditures = (60,000) + (0.65 x 30,000)

Qualifying research expenditures = 60,000 + 19,500

Qualifying research expenditures = $79,500

Question 9

Molly has generated general business credits over the years that have not been utilized.The amounts generated and not utilized follow:
2012
$2,500
2013
7,500
2014
5,000
2015
4,000
​
In the current year,2016,her business generates an additional $15,000 general business credit.In 2016,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 2016 is available for future years?

Accepted Answer

Molly can utilize the carryforward credits of $19,000 ($2,500 + $7,500 + $5,000 + $4,000) and the current year credit of $15,000, for a total of $34,000 in general business credits. However, since her maximum credit utilization is $20,000, she can only use $20,000 of the available credits, leaving $14,000 ($34,000 - $20,000) as carryforward credits for future years. Therefore, the answer is C)$14,000.

Question 10

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

Accepted Answer

The tax credit for rehabilitation expenditures only applies to the rehabilitation of business or income-producing property, therefore no credit is allowed for the rehabilitation of personal use property. Choices A and B are incorrect because not all costs related to the building are qualifying expenditures. Choice C is incorrect because recapture provisions do apply to the tax credit for rehabilitation expenditures in certain circumstances.

Question 11

Cardinal Corporation hires two persons 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:

Accepted Answer

The work opportunity tax credit (WOTC) is a tax credit provided to employers who hire individuals from certain targeted groups who have faced employment barriers. The credit is based on a percentage of qualified first-year wages, up to a maximum amount, for each eligible employee.

For employees certified as eligible members of a targeted group, including food stamp recipients, the maximum credit is 40% of the first $6,000 of qualified first-year wages paid to the employee, which amounts to $2,400 per employee.

In this case, Cardinal Corporation hired two eligible employees and paid them each $9,000 during the year. However, since the maximum WOTC credit is based on the first $6,000 of wages, the credit for each employee is $2,400, for a total credit of $4,800 (2 employees x $2,400 per employee).

Therefore, the correct answer is C, $4,800.

Question 12

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?

Accepted Answer

If Ahmad takes the itemized deduction, he would be able to reduce his taxable income by $10,000, resulting in a tax savings of 28% of $10,000, which is $2,800. On the other hand, if he takes the tax credit, he would be able to directly reduce his tax liability by 25% of $10,000, which is $2,500. Therefore, taking the itemized deduction would be more beneficial for Ahmad, resulting in a tax savings of $2,800.

Question 13

Roger is considering making a $6,000 investment in a venture that its promoter promises will generate immediate tax benefits for him.Roger,who does not anticipate itemizing his deductions,is in the 30% marginal income tax bracket.If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure,by how much will Roger's tax liability decline because of the investment?

Accepted Answer

The tax credit amount would be 40% of $6,000, which is $2,400. This means that Roger's tax liability would decrease by $2,400. Therefore, the correct answer is D.

Question 14

Several years ago,Tom purchased a structure for $300,000 that was placed in service in 1929.Three and one-half years ago he incurred qualifying rehabilitation expenditures of $600,000.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

The recapture of the tax credit for rehabilitation expenditures is 100% of the credit taken during the first five years after placing the property in service, or a fraction thereof (20% per year) for each year thereafter until year ten (IRS Form 3468). Since Tom sold the property in the current year (less than five years after incurring the rehabilitation expenditures), the recapture amount is equal to the full credit taken, which is 20% of the $600,000 ($120,000). However, since the maximum recapture amount is limited to the gain on the sale, in this case, $120,000 is reduced to $24,000 ($300,000 sales price - $276,000 adjusted basis). Therefore, the correct answer is B) $24,000.

Question 15

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:

Accepted Answer

The work opportunity tax credit only applies to a portion of the wages paid by the company, so only $140,000 ($180,000 - $40,000) is eligible to be deducted as wages for tax purposes.

Question 16

Refundable tax credits include the:

Accepted Answer

The earned income credit is a refundable tax credit, meaning that even if a taxpayer's tax liability is zero or negative, they can still receive a refund for the credit. The other options listed are nonrefundable tax credits, meaning they can only reduce a taxpayer's tax liability to zero and do not provide a refund if the credit exceeds the tax liability.

Question 17

Cheryl is single,has one child (age 6),and files as head of household during 2016.Her salary for the year is $19,500.She qualifies for an earned income credit of the following amount.

Accepted Answer

Cheryl qualifies for an earned income credit of $3,164 based on her filing status as head of household, her income level, and having one qualifying child.

Question 18

Rex and Dena are married and have two children,Michelle (age 7)and Nancy (age 5).During 2016,Rex earned a salary of $24,500,received interest income of $300,and filed a joint income tax return with Dena.Dena had $0 gross income.Their earned income credit for the year is:

Accepted Answer

The answer of Rex and Dena are married and have...

Question 19

During 2016,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

The answer of During 2016,Barry (who is single and has...

Question 20

Amber is in the process this year of renovating the office building (placed in service in 1976)used by her business.Because of current Federal Regulations that require the structure to be accessible to handicapped individuals,she incurs an additional $11,000 for various features,such as ramps and widened doorways,to make her office building more accessible.The $11,000 incurred will produce a disabled access credit of what amount?

Accepted Answer

The disabled access credit is designed to help small businesses cover ADA-related expenditures. It allows for a credit of 50% of the eligible access expenditures in a year over $250, up to a maximum expenditure of $10,250. Therefore, for Amber's $11,000 expense, the first $250 is not counted towards the credit. The credit is then 50% of the remaining $10,750, which is $5,375. However, since the maximum expenditure eligible for the credit is $10,250, the credit is actually 50% of $10,000 ($10,250 - $250), which equals $5,000.

Quiz 13: Tax Credits and Payment Procedures

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

Which of the following best describes the treatment applicable to unused business credits?

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:

Which,if any,of the following correctly describes the earned income credit?

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

During the year,Green,Inc. ,incurs the following research expenditures: In-house wages,supplies,computer time $60,000 Paid to Blue Foundation for research 30,000 Green's qualifying research expenditures for the year are:

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

Cardinal Corporation hires two persons 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:

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:

Refundable tax credits include the:

Cheryl is single,has one child (age 6) ,and files as head of household during 2016.Her salary for the year is $19,500.She qualifies for an earned income credit of the following amount.

Rex and Dena are married and have two children,Michelle (age 7) and Nancy (age 5) .During 2016,Rex earned a salary of $24,500,received interest income of $300,and filed a joint income tax return with Dena.Dena had $0 gross income.Their earned income credit for the year is:

During 2016,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:

Quiz 13: Tax Credits and Payment Procedures

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

Which of the following best describes the treatment applicable to unused business credits?

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:

Which,if any,of the following correctly describes the earned income credit?

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

During the year,Green,Inc. ,incurs the following research expenditures: In-house wages,supplies,computer time $60,000 Paid to Blue Foundation for research 30,000 ​ Green's qualifying research expenditures for the year are:

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

Cardinal Corporation hires two persons 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:

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:

Refundable tax credits include the:

Cheryl is single,has one child (age 6) ,and files as head of household during 2016.Her salary for the year is $19,500.She qualifies for an earned income credit of the following amount.

Rex and Dena are married and have two children,Michelle (age 7) and Nancy (age 5) .During 2016,Rex earned a salary of $24,500,received interest income of $300,and filed a joint income tax return with Dena.Dena had $0 gross income.Their earned income credit for the year is:

During 2016,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,Inc. ,incurs the following research expenditures: In-house wages,supplies,computer time $60,000 Paid to Blue Foundation for research 30,000 Green's qualifying research expenditures for the year are: