Hillside Group,a partnership,purchased a building for $60,000 that was originally placed in service in 1929.The partnership incurs $180,000 rehabilitating the building.The building serves as the partnership's headquarters.The rehabilitation is completed in November 2016.What amount can the Hillside Group claim on their partnership return as a rehabilitation tax credit?
A)$2,000
B)$3,000
C)$6,000
D)$18,000
E)$24,000

Question

Quizplus · Accepted Answer

The Hillside group can claim a rehabilitation tax credit equal to 20% of the qualified rehabilitation expenditures, which in this case is $180,000. Therefore, the tax credit would be 20% x $180,000 = $36,000. However, there are limitations on the amount of the credit that can be claimed in a given year. In this case, because the building was originally placed in service before 1936, the credit is limited to the taxpayer's regular tax liability minus the greater of the tentative minimum tax or 25% of the amount by which the taxpayer's taxable income exceeds the phase-out threshold. Without more information about the partnership's taxable income and other relevant factors, it is impossible to determine the exact amount of the credit. However, we can eliminate choices A, B, and C as being too low, leaving choice D ($18,000) as the best option. Choice E is too high, as it exceeds the total qualified rehabilitation expenditures.

Hillside Group,a Partnership,purchased a Building for $60,000 That Was Originally