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Exam 12: Tax Credits and Payments

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Question 1

True/False

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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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Harry and Wei 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 Wei) and report two dependent children. During the year, they pay the following amounts to care for their four-year old son and six-year old daughter while they work. $\begin{array} { l r } \text { ABC Day Care Center } & \$ 3,200 \\\text { Blue Ridge Housekeeping Services } & 2,000 \\\text { Mindy Mason (Harry's mother) } & 1,000\end{array}$ Harry and Wei may claim a credit for child and dependent care expenses of:

A) $840.
B) $1,040.
C) $1,200.
D) $1,240.

E) All of the above
F) None of the above

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Question 3

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A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is under age 17.

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

Cheryl is single, has one child (age six) , and files as head of household during 2019. Her salary for the year is $19,500. She qualifies for an earned income credit of the following amount.

In May 2019, Blue Corporation hired Camilla, Jolene, and Tyrone, all of whom are certified as long-term family assistance recipients. Each employee is paid $12,000 during 2019. a. Compute Blue's work opportunity tax credits for 2019. b. Assume that Blue pays total wages of $500,000 to its employees during 2019. How much may Blue claim as a wage deduction for 2019 if the work opportunity tax credit is claimed?

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

Black Company paid wages of $180,000 of which $40,000 was qualified for the work opportunity tax credit under the general rules. Black Company's deduction for wages for the year is:

Ming and Nancy are married, both gainfully employed, and have two children who are three and six years old. Ming's salary is $35,000 while Nancy's is $40,000. During the year, they spend $7,000 for child care expenses that are required so they can work outside the home. Calculate the couple's credit for child and dependent care expenses.

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

The purpose of the tax credit for rehabilitation expenditures is to encourage the relocation of businesses from older, economically distressed areas (i.e., inner city) to newer locations.

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

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?

During the year, Purple Corporation (a U.S. Corporation) has U.S.-source income of $1,800,000 and foreign income of $600,000. The foreign-source income generates foreign income taxes of $150,000. The U.S. income tax before the foreign tax credit is $816,000. Purple Corporation's foreign tax credit is:

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

Unused foreign tax credits can be carried back three years and forward fifteen years.

Some (or all) of the tax credit for rehabilitation expenditures is recaptured if the rehabilitated property is disposed of prematurely or if it ceases to be qualifying property.

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?

Consider the FICA tax and the self-employment tax. How are these two taxes similar and how do they differ?

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