Question 1

The work opportunity tax credit is available only for wages paid to qualifying individuals during their first year of employment.

Accepted Answer

The work opportunity tax credit is available for wages paid to qualifying individuals during their first year of employment and also for wages paid to certain groups of individuals who face significant barriers to employment, such as veterans, ex-felons, and individuals living in designated empowerment zones.

Question 2

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.

Accepted Answer

The purpose of the tax credit for rehabilitation expenditures is to encourage the rehabilitation of older buildings in order to preserve historic structures and promote economic development in existing communities. It does not specifically target the relocation of businesses.

Question 3

The incremental research activities credit is 20% of the qualified research expenses that exceed the base amount.

Accepted Answer

The incremental research activities credit is calculated as 20% of the qualified research expenses that exceed the base amount.

Question 4

The tax credit for rehabilitation expenditures for certified historic structures differs from that for qualifying structures that are not certified historic structures.

Accepted Answer

The tax credit for rehabilitation expenditures for certified historic structures is 20% of the qualified expenses, while the tax credit for qualifying structures that are not certified historic structures is 10% of the qualified expenses. Additionally, certified historic structures have certain requirements and restrictions that must be met to be eligible for the tax credit.

Question 5

The disabled access credit was enacted to encourage small businesses to make their businesses more accessible to disabled individuals.

Accepted Answer

The disabled access credit was indeed enacted to provide a tax incentive for small businesses to improve their accessibility to disabled individuals. The credit can cover up to 50% of the costs incurred by a small business to make their premises more accessible, with a maximum credit of $5,000.

Question 6

All taxpayers are eligible to take the basic research credit.

Accepted Answer

The basic research credit, also known as the Research and Development (R&D) Tax Credit, is not available to all taxpayers. It is specifically designed for businesses that incur expenses for research and development activities in the United States. Eligibility is based on the nature of the expenses and the activities conducted, not all taxpayers engage in qualifying R&D activities.

Question 7

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

Accepted Answer

This is stated in the Internal Revenue Code Section 47(c)(2).

Question 8

An employer's tax deduction for wages is affected by the work opportunity tax credit.

Accepted Answer

The work opportunity tax credit (WOTC) provides an incentive for employers to hire individuals from targeted groups that face certain barriers to employment. The employer can claim a tax credit for a percentage of the wages paid to these employees. This tax credit directly affects the employer's tax liability, which in turn affects their tax deduction for wages. Therefore, an employer's tax deduction for wages is indeed affected by the work opportunity tax credit.

Question 9

A LIFO method is applied to general business credit carryovers, carrybacks, and utilization of credits earned during a particular year.

Accepted Answer

LIFO (Last-In-First-Out) method is used in accounting for inventory management, and not for general business credit carryovers, carrybacks, and utilization of credits earned during a particular year.

Question 10

A small employer incurs $1,500 for consulting fees related to establishing a qualified retirement plan for its 75 employees. As a result, the employer may claim the credit for small employer pension plan startup costs for $750.

Accepted Answer

The answer of A small employer incurs $1,500 for consulting...

Question 11

Qualified research and experimentation expenditures are not only eligible for the 20% tax credit, but also can be expensed in the year incurred.

Accepted Answer

Qualified research and experimentation expenditures can be expensed in the year incurred under Section 174 of the Internal Revenue Code. In addition, they are eligible for the 20% federal tax credit under Section 41.

Question 12

Qualified rehabilitation expenditures include the cost of acquiring the building, but not the cost of acquiring the land.

Accepted Answer

Qualified rehabilitation expenditures only include the cost of improvements made to the building itself, not the cost of acquiring the building or land.

Question 13

If a taxpayer is required to recapture any tax credit for rehabilitation expenditures, the recapture amount need not be added to the adjusted basis of the rehabilitation expenditures.

Accepted Answer

The recapture amount must be added to the adjusted basis of the rehabilitation expenditures. This will increase the amount of gain or decrease the amount of loss recognized upon the sale or disposition of the property.

Question 14

If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp, the cost of the ramp qualifies for the disabled access credit.

Accepted Answer

The answer of If the cost of a building constructed...

Question 15

The tax benefit received from a tax credit is never affected by the tax rate of the taxpayer.

Accepted Answer

The tax benefit received from a tax credit is not affected by the tax rate of the taxpayer. This is because a tax credit is a dollar-for-dollar reduction in the amount of taxes owed, regardless of the taxpayer's tax bracket. For example, a $1,000 tax credit will reduce a taxpayer's tax liability by $1,000, regardless of whether the taxpayer is in the 10% or 35% tax bracket.

Question 16

The disabled access credit is computed at the rate of 50% of all access expenditures incurred by the taxpayer during the year.

Accepted Answer

The disabled access credit is computed at the rate of 50% of the eligible access expenditures for the year that exceed $250 and do not exceed $10,250.

Question 17

The purpose of the work opportunity tax credit is to encourage employers to hire individuals from specified target groups traditionally subject to high rates of unemployment.

Accepted Answer

The purpose of the work opportunity tax credit is indeed to incentivize employers to hire individuals from targeted groups who have typically faced difficulties in securing employment. These groups include veterans, ex-felons, individuals receiving government assistance, and more.

Question 18

Any unused general business credit must be carried back 3 years and then forward for 20 years.

Accepted Answer

The answer of Any unused general business credit must be...

Question 19

Employers are encouraged by the work opportunity tax credit to hire individuals who have been long-term recipients of family assistance welfare benefits.

Accepted Answer

The work opportunity tax credit is a federal tax credit that encourages employers to hire individuals from certain targeted groups, including long-term family assistance welfare recipients.

Question 20

The tax benefits resulting from tax credits and tax deductions are affected by the tax rate bracket of the taxpayer.

Accepted Answer

The answer of The tax benefits resulting from tax credits...

Quiz 17: Business Tax Credits and Corporate Alternative Minimum Tax