Question 1

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 deduction for wages under the general rules is equal to the total wages paid less any qualified wages used for other tax credits. Therefore, the deduction for wages for Black Company would be $180,000 - $40,000 = $140,000. However, the work opportunity tax credit is a general business credit and can be carried forward or back to other tax years if not fully used in the current year. Therefore, the deduction for wages is increased by the amount of qualified wages used for the work opportunity tax credit, which in this case is $40,000. Therefore, the total deduction for wages for Black Company is $140,000 + $40,000 = $164,000.

Question 2

Mauve,Inc.,has the following for 2012,2013,and 2014 and no prior ACE adjustments. $\begin{array}{lccc}
& 2012 & 2013 & 2014 \\hline
\text{Pre-adjusted AMTI} & \$12,000 & \$15,000 & \$ 8,000 \
\text{Adjusted current earnings} & 10,000 & 17,000 & 5,000 \
\end{array}$

Whatis the ACE adjustment for each of the three years?

$~~~~~~~~~~\underline{2012}~~~~~~~~$  $\underline{2013}~~~~~~~~$  $\underline{2014}$

Accepted Answer

ACE adjustment= Pre-adjusted AMTI-Adjusted current earnings2012: $12,000-$10,000=$2,0002013: $15,000-$17,000=($2,000)2014: $8,000-$5,000=$3,000

Question 3

Factors that can cause the adjusted basis for AMT purposes to be different from the adjusted basis for regular income tax purposes include the following:

Accepted Answer

The answer of Factors that can cause the adjusted basis...

Question 4

Amber is in the process this year of renovating the office building (originally 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 answer of Amber is in the process this year...

Question 5

Vicki owns and operates a news agency (as a sole proprietorship).During 2013,she incurred expenses of $24,000 to increase circulation of newspapers and magazines that her agency distributes.For regular income tax purposes,she elected to expense the $24,000 in 2013.In addition,Vicki incurred $15,000 in circulation expenditures in 2014 and again elected expense treatment.What AMT adjustments will be required in 2013 and 2014 as a result of the circulation expenditures?

Accepted Answer

For AMT purposes, circulation expenditures must be capitalized and amortized over 3 years. In 2013, $8,000 of the $24,000 is deductible, resulting in a $16,000 positive AMT adjustment. In 2014, $5,000 of the $15,000 is deductible, resulting in a $2,000 positive AMT adjustment.

Question 6

Omar acquires used 7-year personal property for $100,000 to use in his business in February 2013.Omar does not elect § 179 expensing,but does take the maximum regular cost recovery deduction.He elects not to take additional first-year depreciation.As a result,Omar will have a positive AMT adjustment in 2013 of what amount?

Accepted Answer

The AMT adjustment is the difference between the regular tax depreciation and the AMT depreciation. For 7-year property, the regular MACRS method uses 200% declining balance, while AMT uses 150% declining balance. The difference in depreciation for 2013 results in a positive AMT adjustment of $3,580.

Question 7

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

Accepted Answer

To qualify for the research credit, research expenditures must satisfy the following four-part test:

1. Must be incurred in research and experimentation 
2. Must be technological in nature 
3. Must be intended to eliminate uncertainty 
4. Must involve a process of experimentation

In this scenario, all of the listed expenditures appear to satisfy these criteria and can be included in calculating Green's qualifying research expenditures for the year:

- Wages for in-house research personnel ($30,000) 
- Contract research expenses ($40,000) 
- Supplies and materials ($5,000) 
- Computer leasing costs ($4,500)

Adding these amounts together results in a total of $79,500, which is answer choice C.

Question 8

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:

Accepted Answer

The answer of During the year,Green Corporation (a U.S.corporation)has U.S.-source...

Question 9

Sand Corporation,a calendar year taxpayer,has alternative minimum taxable income [before adjustment for adjusted current earnings (ACE)] of $900,000 for 2013.If Sand's (ACE)is $975,000,its tentative minimum tax for 2013 is:

Accepted Answer

To calculate the tentative minimum tax, we need to first calculate the alternative minimum taxable income (AMTI) by adding back the adjustment for ACE. 
AMTI = Alternative minimum taxable income + ACE adjustment 
AMTI = $900,000 + $975,000 
AMTI = $1,875,000

Then, we calculate the tentative minimum tax by applying a flat rate of 20% to AMTI: 
Tentative minimum tax = 20% x AMTI 
Tentative minimum tax = 20% x $1,875,000 
Tentative minimum tax = $375,000

However, we also need to compare the tentative minimum tax to the regular tax liability (before any credits). If the regular tax liability is higher, then we simply pay the regular tax liability. If the tentative minimum tax is higher, then we pay the tentative minimum tax.

In this case, we don't have any information about Sand Corporation's regular tax liability, so we can't compare it to the tentative minimum tax. Therefore, we simply pay the tentative minimum tax of $375,000.

However, we need to subtract any foreign tax credits from the tentative minimum tax. We don't know if Sand Corporation has any foreign tax credits, so we can't say if the final answer is D or a lower amount.

Question 10

Lemon,Inc.,has the following items related to the AMT: $\begin{array}{ll}
\text { Alternative minimum tax base } & \$ 10,275,500 \
\text { Regular corporate tax } & 1,112,500 \
\text { Foreign AMT tax credit } & 187,020 \
\text { Cost of gonds sold } & 2,260,020
\end{array}$ The corporation's AMT,if any,is:

Accepted Answer

The AMT is calculated as 20% of the alternative minimum tax base minus the foreign AMT tax credit: $0.20 \times 10,275,500 - 187,020 = 2,055,100 - 187,020 = 1,868,080$.

Question 11

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:

Accepted Answer

The foreign tax credit is equal to the lesser of the foreign taxes paid or the U.S. tax on foreign-source income. In this case, the foreign taxes paid on foreign income of $600,000 is $150,000. The U.S. tax on foreign-source income would be calculated by multiplying the foreign income by the U.S. tax rate, which is 21% for corporations. Therefore, the U.S. tax on foreign income would be $126,000 (600,000 x 21%). Since the foreign taxes paid of $150,000 is greater than the U.S. tax on foreign income of $126,000, the foreign tax credit is limited to $126,000. Therefore, the best choice is B) $150,000.

Question 12

In March 2013,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 2013.Only one of the individuals continued to work for Gray Corporation in 2014,earning $9,000 during the year.No additional workers were hired in 2014.Gray Corporation's work opportunity tax credit amounts for 2013 and 2014 are:

Accepted Answer

The work opportunity tax credit (WOTC) is available for employers who hire individuals from certain targeted groups, including long-term family assistance recipients. For each long-term family assistance recipient hired, the WOTC is generally equal to 40% of the first $6,000 of wages paid in the first year of employment and 25% of the first $10,000 of wages paid in the second year of employment.

In this case, Gray Corporation hired two long-term family assistance recipients in 2013 and paid them each $11,000. Therefore, the total wages paid to both employees were $22,000. The WOTC for 2013 is 40% of the first $6,000 of wages paid to each employee, or $4,800 per employee. Since Gray Corporation hired two eligible employees, they are eligible for a total WOTC of $9,600 for 2013.

In 2014, only one of the two employees continued to work for Gray Corporation and was paid $9,000. Therefore, the WOTC for 2014 is 40% of the first $6,000 of wages paid to this employee, or $2,400.

Adding the 2013 and 2014 WOTCs together, Gray Corporation's total WOTC amount is $9,600 + $2,400 = $12,000. However, since answer choice D is not one of the options, the best choice is B, which is the closest option at $8,000 in 2013 and $4,500 in 2014.

Question 13

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 50% of eligible expenses up to $10,250, so in this case, 50% of $9,000 is $4,500, but since the credit is limited to $10,250, the final credit amount is $4,375.

Question 14

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 15

Eula owns a mineral property that had a basis of $23,000 at the beginning of the year.Cost depletion is $19,000.The property qualifies for a 15% depletion rate.Gross income from the property was $200,000 and net income before the percentage depletion deduction was $50,000.What is Eula's tax preference for excess depletion?

Accepted Answer

The answer of Eula owns a mineral property that had...

Question 16

In 2013,Glenn had a $108,000 loss on a passive activity.None of the loss is attributable to AMT adjustments or preferences.She has no other passive activities.Which of the following statements is correct?

Accepted Answer

For regular income tax purposes, passive losses can only be used to offset passive income. Any excess losses can be carried forward to future years. Since Glenn had no other passive activities, the $108,000 loss cannot be used to offset any other income in 2013. This means that for regular income tax purposes, none of the loss is allowed in 2013.

Question 17

Tanver Corporation,a calendar year corporation,has alternative minimum taxable income of $7 million in 2013 (before adjustment for adjusted current earnings).If Tanver's adjusted current earnings is $16 million,its tentative minimum tax for 2013 is:

Accepted Answer

To calculate the tentative minimum tax, we need to first compare the alternative minimum taxable income (AMTI) with the adjusted current earnings (ACE). 
If AMTI is less than or equal to ACE, the tentative minimum tax is 20% of the excess of AMTI over the exemption amount. 
The exemption amount for 2013 is $40,000, so the excess is $7 million - $40,000 = $6,960,000. 
Tentative minimum tax = 20% * $6,960,000 = $1,392,000. 
However, there is a reduction in the tentative minimum tax based on the amount by which the regular tax exceeds the tentative minimum tax. 
In this case, we don't know the regular tax yet, so we can't calculate the reduction. 
But we do know that the tentative minimum tax can't be less than 90% of the AMT in the prior year. 
Assuming Tanver had AMT of at least $7 million in the prior year, the tentative minimum tax for 2013 would be $6,300,000 (90% of $7 million). 
So the final answer is the higher of the two calculations: 
Tentative minimum tax = max($1,392,000, $6,300,000) = $6,300,000. 
Therefore, the best choice is B.

Question 18

Which of the following statements is correct?

Accepted Answer

The answer of Which of the following statements is correct?
...

Question 19

Dale owns and operates Dale's Emporium as a sole proprietorship.On January 30,1998,Dale's Emporium acquired a warehouse for $100,000.For regular income tax purposes in 2013,depreciation was deducted under MACRS using a rate of 2.564%.Determine the AMT adjustment for depreciation and indicate whether it is positive or negative.

Accepted Answer

The answer of Dale owns and operates Dale's Emporium as...

Question 20

Which of the following can produce an AMT preference rather than an AMT adjustment?

Accepted Answer

The answer of Which of the following can produce an...

Quiz 14: Business Tax Credits and Corporate Alternative Minimum Tax

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:

Factors that can cause the adjusted basis for AMT purposes to be different from the adjusted basis for regular income tax purposes include the following:

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

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:

Sand Corporation,a calendar year taxpayer,has alternative minimum taxable income [before adjustment for adjusted current earnings (ACE) ] of $900,000 for 2013.If Sand's (ACE) is $975,000,its tentative minimum tax for 2013 is:

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:

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 research activities credit?

In 2013,Glenn had a $108,000 loss on a passive activity.None of the loss is attributable to AMT adjustments or preferences.She has no other passive activities.Which of the following statements is correct?

Tanver Corporation,a calendar year corporation,has alternative minimum taxable income of $7 million in 2013 (before adjustment for adjusted current earnings) .If Tanver's adjusted current earnings is $16 million,its tentative minimum tax for 2013 is:

Which of the following statements is correct?

Which of the following can produce an AMT preference rather than an AMT adjustment?

Quiz 14: Business Tax Credits and Corporate Alternative Minimum Tax

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:

Factors that can cause the adjusted basis for AMT purposes to be different from the adjusted basis for regular income tax purposes include the following:

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

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:

Sand Corporation,a calendar year taxpayer,has alternative minimum taxable income [before adjustment for adjusted current earnings (ACE) ] of $900,000 for 2013.If Sand's (ACE) is $975,000,its tentative minimum tax for 2013 is:

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:

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 research activities credit?

In 2013,Glenn had a $108,000 loss on a passive activity.None of the loss is attributable to AMT adjustments or preferences.She has no other passive activities.Which of the following statements is correct?

Tanver Corporation,a calendar year corporation,has alternative minimum taxable income of $7 million in 2013 (before adjustment for adjusted current earnings) .If Tanver's adjusted current earnings is $16 million,its tentative minimum tax for 2013 is:

Which of the following statements is correct?

Which of the following can produce an AMT preference rather than an AMT adjustment?

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