Question 1

The AMT credit is created for any AMT that results from timing differences, but it is not created by any AMT that results from the adjustment for itemized deductions or exclusion preferences.

Accepted Answer

The AMT credit is only created for AMT resulting from timing differences, not for adjustments related to itemized deductions or exclusion preferences.

Question 2

In March 2019, 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 2019.Gray's work opportunity tax credit amounts for 2019 is:

Accepted Answer

Gray Corporation is eligible for the work opportunity tax credit for hiring long-term family assistance recipients. The credit is 40% of the first $6,000 in wages paid to each employee during the first year of employment. Therefore, the credit for each employee is $2,400 ($6,000 x 0.40). Since Gray hired two employees and paid each of them $11,000, the credit for both employees is $4,800 ($2,400 x 2).

Question 3

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:

Accepted Answer

The deduction for wages is calculated by subtracting the amount of the work opportunity tax credit from the total wages paid. Therefore, Black Company's deduction for wages is $180,000 - $40,000 = $140,000.

Question 4

Interest income on private activity bonds issued in 2015 reduced by expenses incurred in carrying the bonds is a preference item that is included in computing AMTI.

Accepted Answer

Interest income on private activity bonds is a preference item that is included in AMTI. Additionally, any expenses incurred in carrying the bonds are also included in the calculation of AMTI. Therefore, the statement is true.

Question 5

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

Accepted Answer

Unused business credits are first carried back one year and then can be carried forward for 20 years. This allows businesses to apply these credits to past and future tax liabilities.

Question 6

Ahmad is considering making a $10,000 investment in a venture whose promoter promises will generate immediate tax benefits for him.Ahmad, who normally itemizes his deductions, is in the 32% 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 is likely most beneficial to Ahmad, and by how much will Ahmad's tax liability decline because of the investment?

Accepted Answer

The answer of Ahmad is considering making a $10,000 investment...

Question 7

Without the foreign tax credit, double taxation would result when:

Accepted Answer

The foreign tax credit provides relief from double taxation when both the United States and a foreign country tax the same foreign-source income of a U.S. resident. Without the foreign tax credit, the U.S. resident would be subject to taxation on the same income by both countries, resulting in double taxation. Option A is incorrect because the foreign tax credit applies to U.S. residents' foreign-source income, not U.S.-source income. Option B is incorrect because nonresident aliens are not entitled to the foreign tax credit. Option D does not relate to the question of double taxation without the foreign tax credit.

Question 8

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:

Accepted Answer

The disabled access credit is equal to 50% of eligible expenditures over $250 and up to $10,250. For Green Company, the calculation is 50% of ($9,000 - $250) = 50% of $8,750 = $4,375.

Question 9

Kay claimed percentage depletion of $119,000 for the current year for regular income tax purposes.Cost depletion would have been $60,000.Her basis in the property was $90,000 at the beginning of the current year.Kay must treat the percentage depletion deducted in excess of cost depletion, or $59,000, as a preference in computing AMTI.

Accepted Answer

The answer of Kay claimed percentage depletion of $119,000 for...

Question 10

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:

Accepted Answer

The answer of Cardinal Corporation hires two persons who are...

Question 11

Molly has generated general business credits over the years that have not been utilized.The amounts generated and not utilized equal:   In the current year, 2019, her business generates an additional $15,000 general business credit.In 2019, 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 2019 is available for future years? 
a.$0.
b.$1,000.
c.$14,000.
d.$15,000.

Accepted Answer

The answer of Molly has generated general business credits over...

Question 12

During the year, Green, Inc., incurs the following research expenditure.  Green's qualifying research expenditures for the year are:

Accepted Answer

The answer of During the year, Green, Inc., incurs the...

Question 13

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 equal to 50% of eligible access expenditures over $250 but not more than $10,250, so in this case, the credit would be 50% of ($11,000 - $250), which is $5,375. However, since the maximum credit is $5,000, the credit would be limited to that amount. Therefore, the answer is B) $5,000.

Question 14

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

Accepted Answer

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

Question 15

If a taxpayer elects to capitalize and to amortize intangible drilling costs over a three-year period for regular income tax purposes, there is no adjustment or preference for AMT purposes.

Accepted Answer

For AMT purposes, intangible drilling costs must be capitalized and amortized over a longer period than three years, resulting in an adjustment or preference.

Question 16

Jackson sells qualifying small business stock for $125,000 (adjusted basis of $105,000) in 2019 (the stock was acquired in 2012).In calculating gross income for regular income tax purposes, he excludes all of his realized gain of $20,000.The $20,000 exclusion is a preference in calculating Jackson's AMTI.

Accepted Answer

The exclusion of gain on the sale of qualifying small business stock under Section 1202 is not considered a preference item for the calculation of Alternative Minimum Taxable Income (AMTI), so it does not add back to AMTI.

Question 17

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

Accepted Answer

The tax credit for rehabilitation expenditures is only allowed for the rehabilitation of a historic structure. There is no credit allowed for the rehabilitation of a nonhistoric structure.

Question 18

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

Since the investment is a tax credit, rather than a deduction, it directly reduces Roger's tax liability by the full amount of the credit. Therefore, Roger's tax liability will decline by 40% of his $6,000 investment, or $2,400.

Question 19

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

Accepted Answer

All the options listed (A through D) are indeed components of the general business credit. The general business credit is a composite of various tax credits available to businesses, including those for employer-provided child care facilities and services, making facilities accessible to disabled individuals, increasing research activities, and rehabilitation expenditures.

Question 20

Several years ago, Sarah purchased a certified historic 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 certified...

Quiz 17: Business Tax Credits and the Alternative Minimum Tax