Deck 6: Credits and Special Taxes

Question 1

Denise is divorced and files a single tax return claiming her two children,ages 7 and 9,as dependents.Her AGI for 2017 is $81,500.Denise's child tax credit for 2017 is:

A)$0
B)$350
C)$1,000
D)$1,650
E)$2,000

Answer 1

D

Question 2

In 2017,Alex has income from wages of $16,000,adjusted gross income of $18,000,and tax liability of $300 before the earned income credit.What is the amount of Alex's earned income credit for 2017,assuming he is single and his 5-year-old dependent son lives with him for the full year?

A)$0
B)$1,000
C)$3,373
D)$3,400
E)None of the above

Answer 2

D

Question 3

To be eligible for the earned income credit for 2017,a taxpayer must have a "qualifying child."

Answer 3

False

Question 4

Which one of the following taxpayers qualify for the earned income credit in 2017?

A)A 70-year-old doctor whose practice had a net loss and who has an AGI of $5,000.
B)An 18-year-old college student who earns $8,000 at a part-time job.
C)A couple who have a combined AGI of $17,000 and three children but file separately.
D)A single,31-year-old construction worker with $22,000 of AGI and two children.
E)None of the above qualifies for the earned income credit.

Question 5

Maxine is a 29-year-old single mother.Her tax liability before any credits is $1,000 and her earned income credit is $2,500.What is the amount of Maxine's refund? Explain.

Question 6

The earned income credit:

A)Must be calculated on earned income as well as adjusted gross income in some cases.
B)Can not exceed the amount of the tax liability.
C)Is available only if the taxpayer has qualifying children.
D)Is available to married taxpayers who file separate returns.

Question 7

For the 2017 tax year,Sally,who is single,reported the following items of income: She maintains a household for herself and her 1-year-old son who qualifies as her dependent.What is the earned income credit available to her for 2017,using the tables?

A)$503
B)$1,369
C)$2,423
D)$2,627
E)None of the above

Question 8

What would reduce income taxes more: a $100 tax credit or a $100 tax deduction?

Question 9

The child tax credit is $1,000 per qualifying child unless it is phased out due to higher levels of parental income.

Question 10

Curly and Rita are married,file a joint return,and have two dependent children,ages 11 and 13.Their AGI is $117,000.By how much is their child credit reduced in 2017?

A)$0
B)$300
C)$350
D)$700
E)$7,000

Question 11

Calculate the child tax credits for the following taxpayers.Please show your work.
a.Ninfa is a single mother with 8-year-old and 9-year-old dependent sons and has $50,000 of AGI.
b.Sharon and Mark have one dependent 2-year-old child and $126,300 of AGI.
c.Carol is single and has one dependent 18-year-old son and $21,000 of AGI.

Question 12

For 2017,Wilson and Virginia Todd qualify for the earned income credit.They file married filing jointly and have two dependent children,ages 6 months and 4 years at the end of the year.
a.​
​
Using the EIC tables,calculate the amount of Wilson and Virginia Todd's earned income credit assuming Wilson has earned income of $7,300 and Virginia has no earned income.Their adjusted gross income for 2017 is $9,000.
b.​
​
Calculate the amount of Wilson and Virginia Todd's earned income credit assuming Wilson has earned income of $14,300 and Virginia has earned income of $2,000.Their adjusted gross income for 2017 is $16,500.​

Question 13

For 2017,Beatrice qualifies for the earned income credit.She has one daughter who is 7 years old.Her earned income and adjusted gross income for 2017 are $6,200.
a.Using the EIC tables,calculate the amount of her 2017 earned income credit.
b.​
Calculate the amount of Beatrice's 2017 earned income credit assuming her earned income for 2017 is $8,500 and her adjusted gross income is $10,000.

Question 14

The child tax credit is not available for children ages 17 and older.

Question 15

​To qualify for the additional child tax credit

A)​the typical child tax credit must be limited by tax liability
B)​the taxpayer must have earned income of over $3,000
C)​the taxpayer must have at least one qualifying child
D)​all of the above are required to qualify for the additional child tax credit

Question 16

Which of the following tax credits is not available for the 2017 tax year?

A)Foreign tax credit
B)Earned income credit
C)Adoption credit
D)Child and dependent care credit
E)All of the above are available credits

Question 17

What is the maximum investment income a taxpayer is allowed to have and still be allowed to claim the earned income credit? Why is there an earned income credit in the law?

Question 18

Bob and Carol file their tax returns using the married filing jointly status.Their AGI is $132,500.They have two children,ages 11 and 7.How much child tax credit can Bob and Carol claim for their two children?

A)$0
B)$850
C)$875
D)$1,150
E)None of the above is correct.

Question 19

The use of the earned income credit could result in a taxpayer receiving a refund even though he or she has not paid any income taxes.

Question 20

In 2017,the child tax credit available to married taxpayers filing jointly is phased out,beginning at:

A)$55,000
B)$75,000
C)$95,000
D)$110,000

Question 21

Arthur is divorced with two dependent children,ages 8 and 13.His adjusted gross income is $28,000,and he incurs qualified child care expenses of $6,000,$3,000 for each child.
a.What is the amount of Arthur's qualified child care expenses after any limitation?
b.Calculate the amount of Arthur's child and dependent care credit.

Question 22

The child and dependent care provisions:

A)Apply only to children under age 15.
B)Are available only to single parents.
C)Are available for the care of spouses incapable of self-care.
D)Are allowed only for taxpayers earning less than $43,000.

Question 23

All taxpayers are required to have minimum essential health coverage.​

Question 24

A taxpayer with earned income of $50,000 is not eligible to claim the credit for child and dependent care expenses.

Question 25

Jeff and Geri are married and have AGI of $95,000 and three young children.Geri pays $6,000 a year to day care providers so she can teach a yoga class and do household errands.Geri earns $5,000 teaching the yoga class.How much child and dependent care credit can Jeff and Geri claim? Why?

Question 26

In determining the amount of the child and dependent care credit,there is a limit of $2,000 on the amount of qualified expenses for one dependent.

Question 27

Amounts paid to a relative generally do not qualify as child care expenses.

Question 28

Taxpayers are required to wait until they file their tax return to receive the premium tax credit.​

Question 29

Martin and Rachel are married and have a 3-year-old child.Martin is going to medical school full-time for 12 months of the year and Rachel earns $45,000.Their child is in day care so Martin can go to school while Rachel is at work.The cost of their day care is $10,000.What is their child and dependent care credit? Please show your calculations and explain.

Question 30

​Which of the following is not a requirement to claim an earned income credit?

A)​Social Security number
B)​At least one child claimed as a dependent
C)​At least $1 of earned income
D)​US citizenship or resident alien status

Question 31

Caprice is a single 42-year-old with income of $12,000 in 2017.She lacked minimum essential coverage for 7 months in 2017.What is her individual shared responsibility payment amount?

A)$0
B)$405.44
C)$695.00
D)$57.92
E)None of the above

Question 32

Robert and Mary file a joint tax return for 2017 with adjusted gross income of $34,000.Robert and Mary earned income of $20,000 and $14,000,respectively,during 2017.In order for Mary to be gainfully employed,they pay the following child care expenses for their 4-year-old son,John: What is the amount of the child and dependent care credit they should report on their tax return for 2017?

A)$270
B)$459
C)$675
D)$729
E)None of the above

Question 33

For 2017,the maximum amount of expenses that qualify for the child and dependent care credit is the same for three dependents as it is for two dependents.

Question 34

Married taxpayers must generally file a joint tax return to claim the child and dependent care credit.

Question 35

Phillip and Naydeen Rivers are married with two dependent children.The family has household income of $38,900 in 2017.They paid $11,000 for health care for the year through the health care exchange.A designated silver plan would have cost $9,800.What is the Rivers' premium tax credit?

A)$0
B)$1,413
C)$8,038
D)$8,030
E)$9,800

Question 36

Jessica and Robert have two young children.They have $7,000 of qualified child care expenses and an AGI of $22,000 in 2017.What is their allowable child and dependent care credit?

A)$1,860
B)$1,920
C)$2,000
D)$6,000
E)$7,000

Question 37

Marion has an 11-year-old daughter.Please calculate her child and dependent care credit under these two alternatives:
​
a.Marion pays $4,000 a year in day care costs.Her salary is $32,000.
b.Marion pays $8,000 a year in day care costs.Her salary is $80,000.

Question 38

Jeff is a stay-at-home father who earns $600 from odd jobs and takes care of his daughter.His wife,Michelle,is the bread-winner and brings in $60,000 of income a year.In addition to the care provided by Jeff,Michelle pays $4,500 in child care.
​
In the current year,how much are Jeff and Michelle's qualifying expenses for the child and dependent care credit?

Question 39

Clark,a widower,maintains a household for himself and his two dependent preschool children.For the year ended December 31,2017,Clark earned a salary of $32,000.He paid $3,600 to a housekeeper to care for his children in his home,and also paid $1,500 to a kiddie play camp for child care.He had no other income or expenses during 2017.How much can Clark claim as a child and dependent care credit in 2017?

A)$910
B)$1,300
C)$1,326
D)$5,100
E)None of the above

Question 40

​Avery is a single 26 year old graduate student at State University with no children.She is a US citizen with a valid Social Security number.Her only income is from a part-time job on campus from which she earned wages of $6,000.Avery qualifies for the earned income credit.

Question 41

Explain what type of educational expenses qualify for the American Opportunity tax credit and what type of educational expenses qualify for the lifetime learning credit.

Question 42

Hal is enrolled for one class at a local community college;tuition cost him $190.Hal's AGI is $20,000.Hal can take a lifetime learning credit of:

A)$0
B)$38
C)$100
D)$190
E)$250

Question 43

Fletch and Cammie Gates are married with three dependent children and household income of $51,192 in 2017.The Gates purchased health care insurance on their state's exchange for total premiums of $6,800.A designated silver plan for their family in their state costs $9,700.Calculate the Gates' premium tax credit.

Question 44

Richard has $30,000 of income from a country that imposes a 40-percent income tax and $30,000 of income from a country that imposes a 34- percent income tax.In addition to the foreign income,he has taxable income from U.S.sources of $120,000 and a U.S.tax liability,before credits,of $45,575.The amount of Richard's foreign tax credit is:

Question 45

Vicky is a single,21 year-old,full-time student who purchased health care through the state health care exchange for the full year.Her part-time job pays her $12,000 in 2017.She files her own tax return but is claimed as a dependent by her parents.Vicky is eligible for the premium tax credit.

Question 46

​Margo and her spouse have health insurance for the entire year through the state health care exchange.Margo will need to pay her spouse's individual shared responsibility.

Question 47

John graduates from high school in 2017 and enrolls in a private college in the fall.His parents pay $10,000 for his tuition and fees.
a.Assuming John's parents have AGI of $46,000,what is the American Opportunity credit they can claim for John? Explain.
b.Assuming John's parents have AGI of $175,000,what is the American Opportunity credit they can claim for John? Explain.

Question 48

The American Opportunity tax credit

A)Is 50 percent of the first $1,200 of tuition and fees paid and 100 percent of the next $1,200.
B)Is available for 2 years of post-secondary education.
C)Is fully refundable even if the credit exceeds the tax liability.
D)Is available for qualifying expenses paid on behalf of the taxpayer and his or her spouse,in addition to those paid for dependents.

Question 49

The foreign tax credit applies only to foreign corporations.

Question 50

Steve goes to Tri-State University and pays $40,000 in tuition.Steve works a part-time job to pay for his schooling and has an AGI of $17,000.How much is his American Opportunity tax credit?

A)$2,000
B)$2,500
C)$4,000
D)$1,000
E)He does not qualify for the American Opportunity tax credit.

Question 51

​Brad works at the local pizza shop as a delivery person.He is hoping to change to a position in the kitchen and takes a culinary course at the local community college for $1,400.Assuming he is eligible,Brad's lifetime learning credit is:

Question 52

Taxpayer Q has net taxable income of $30,000 from Country Y which imposes a 40 percent income tax.In addition to the income from Country Y,taxpayer Q has net taxable income from U.S.sources of $120,000,and U.S.tax liability,before the foreign tax credit,of $41,750.What is the amount of Q's foreign tax credit?

A)$2,400
B)$8,350
C)$12,000
D)$30,000
E)None of the above

Question 53

After raising two children,Anh,a single 48 year old,decided to go to college to get a degree.She spent two years in community college and earned an Associates degree.In 2017,she is enrolled half-time at State University to earn a Bachelor's degree in Accounting and also works part-time.Anh is eligible for the American Opportunities tax credit.

Question 54

Keith has a 2017 tax liability of $2,250 before taking into account his American Opportunity tax credit.He paid $2,600 in qualifying expenses,was a full-time student,was not claimed as a dependent on his parents' return,and his American Opportunity tax credit was not subject to phase-out.What is the amount of his American Opportunity tax credit allowed?

A)$0
B)$2,150
C)$2,250
D)$2,600
E)$4,000

Question 55

Household income for purpose of the premium tax credit includes all of the following except:

A)AGI of the taxpayer
B)AGI of the taxpayer's dependents if required to file a return
C)Any tax-exempt income
D)Nontaxable Social Security benefits
E)All of the above are included in household income

Question 56

Jim has foreign income.He earns $26,000 from Country A which taxes the income at a 20 percent rate.He also has income from Country B of $18,000.Country B taxes the $18,000 at a 10 percent rate.His U.S.taxable income is $90,000,which includes the foreign income.His U.S.income tax on all sources of income before credits is $19,000.What is his foreign tax credit?

A)$6,500
B)$7,000
C)$9,289
D)$19,000
E)Jim does not qualify for a foreign tax credit.

Question 57

Alice is a single taxpayer with no dependents that has AGI of $9,000 in 2017.Alice is required to carry minimum essential coverage in 2017.

Question 58

​Which of the following is not an exemption from minimum essential coverage for health insurance:

A)​the taxpayer had coverage for all but 1 month during the year
B)the taxpayer's income of less than 200% of the federal poverty level
C)​the taxpayer was in jail
D)​the taxpayer spent 350 days out of the US during the year

Question 59

Jasmine is a single marketing manager with a college degree.She continually updates her marketing knowledge and gets fresh ideas by taking classes at the local community college.This year she spent $1,500 on course tuition and fees.If Jasmine has AGI of $58,000,how much lifetime learning credit can she claim on her tax return? Explain.

Question 60

​Household income for purpose of the individual shared responsibility payment includes all of the following except:

A)​AGI of the taxpayer
B)​AGI of the taxpayer's dependents
C)​Any tax-exempt income
D)​Nontaxable Social Security benefits
E)​All of the above are included in household income

Question 61

John and Susan file a joint income tax return for 2017.They have two dependent children,students,ages 19 and 20.John earns wages of $108,000 and they have interest income of $2,000.In 2017,they settle a state tax audit and pay $50,000 for back state taxes due to an overly aggressive tax-sheltered investment.
Their other expenses for the year include:
​

a.Calculate John and Susan's 2017 regular tax and tentative minimum tax on the schedule provided.​
​

b.How much is the total tax liability shown on John and Susan's 2017 Form 1040?

Question 62

In the case of the adoption of a child who is not a U.S.citizen or resident of the U.S. ,the credit for qualified adoption expenses is available:

A)In the first year the expenses are paid.
B)Each year expenses are paid.
C)In the last year expenses are paid.
D)In the year the adoption becomes final.

Question 63

For all taxpayers,except those married filing separately,the individual alternative minimum tax rate for 2017 is 26 percent on the first $187,800 of income and 20 percent on income above $187,800.

Question 64

Dan and Maureen file a joint income tax return for 2017.They have two dependent children,ages 7 and 9.Together they earn wages of $152,000.They also receive taxable interest income of $8,000 and interest on City of Los Angeles bonds of $12,000.During 2017,they received a state income tax refund of $3,000 relating to their 2016 state income tax return on which they itemized deductions.Their expenses for the year consist of the following:
Calculate Dan and Maureen's tentative minimum tax liability assuming an AMT exemption amount of $84,500,before any phase-outs.Show your calculations.

Question 65

List at least two AMT preferences and/or adjustments and show the simplified formula for calculating AMT.Do not include dollar exemption amounts or the tax rate schedule.

Question 66

In 2017,Brady purchases a 2017 Nissan Leaf electric vehicle for his personal use.He is eligible to claim a credit of $7,500.He is in the 35 percent marginal tax bracket and his regular tax liability before credits is $14,800.What is the tax benefit Brady realizes from this purchase?

Question 67

The total expenses that can be taken as a credit for all tax years for adoption of a child without "special needs" is $10,000.

Question 68

Taxpayers are allowed two tax breaks for adoption expenses.They are allowed:

A)​ ​
​
B)​ ​
​
C)​ ​
​
D)​ ​
​

Question 69

Carla and Bob finalized an adoption in 2017.Their adoption fees totaled $9,500.They have AGI of $207,540 for 2017.What is their adoption credit?

A)$8,075
B)$8,550
C)$9,500
D)$13,400

Question 70

Edward has business operations in Country F and Country G.He pays tax to Country F of $12,000 on $30,000 of income and pays tax to Country G of $4,000 on $10,000 of income.In addition to the income from Country F and Country G,Edward has $100,000 of income from U.S.sources and a total U.S.tax liability,before the foreign tax credit,of $42,000.
​
What amount of foreign tax credit may Edward claim on his U.S.tax return?

Question 71

In calculating the individual AMT,the tentative minimum tax liability may not exceed the regular tax liability of the taxpayer.

Question 72

The alternative minimum tax must be paid only if the tentative minimum tax exceeds a taxpayer's regular tax liability.

Question 73

Sheila and Jerry are married taxpayers with $600 of foreign tax withholding from the dividends in a mutual fund.They have enough foreign income from the mutual fund to claim the full $600 as a foreign tax credit.They are in the 35% tax bracket and they itemize deductions.Should they claim the foreign tax credit on the Form 1040 or a deduction for foreign taxes on their Schedule A? Why?

Question 74

Choose the correct statement: ​

A)A taxayer may receive a 30-percent credit for installing energy-efficient window shades.
B)A taxpayer may receive a 30-percent credit for installing solar electric property at his vacation home.
C)A taxpayer may receive a 30-percent credit for installing a solar water-heating panel for his swimming pool.
D)A taxpayer may receive a 30-percent credit for the purchase of a plug-in electric vehicle.

Question 75

Daddy Warbucks is in the process of adopting Annie from a New York orphanage.He pays $7,000 in 2016,and $7,500 in 2017.Daddy Warbucks' AGI for 2017 is $165,000.
​
a.How much is the adoption credit that Daddy Warbucks may claim for 2017 if the adoption becomes final in 2017?
b.How much is the adoption credit that Daddy Warbucks may claim for 2017 if the adoption becomes final in 2018?
c.How much is the adoption credit that Daddy Warbucks may claim for 2017 if the adoption falls through and is never finalized?

Question 76

An individual may claim both a credit and an exclusion from income in connection with the adoption of an eligible child,but may not claim both a credit and an exclusion for the same expense.

Question 77

Jenny adopts a Vietnamese orphan.The adoption takes three years,two trips to Vietnam,and becomes final in 2017.She pays $10,000 in 2015,$5,000 in 2016,and $5,000 in 2017 of qualified adoption expenses.She has AGI of $150,000.
a.What is the adoption credit Jenny can claim in 2017?
b.How much credit could she claim if the adoption falls through and is never finalized?

Question 78

What is the purpose of the alternative minimum tax?

Question 79

A tax credit is allowed for qualified adoption expenses paid by taxpayers:

A)And an additional credit is allowed for qualified adoption expenses paid for by taxpayers' employers.
B)And an income exclusion is allowed for qualified adoption expenses paid for by taxpayers' employers.
C)And is available each year qualifying expenses are incurred.
D)And is not subject to a phase-out based on adjusted gross income.

Question 80

In 2017,Erin purchased a solar system to generate electricity for her home,at a cost of $5,000.
a.How much is her tax credit in 2017?
b.If she had purchased a solar heating system for her swimming pool at a cost of $3,500,how much could she claim as a tax credit?
c.If she had purchased a $5,000 solar electric system and a $4,500 solar heating system for her principal home (not for the swimming pool),how much could she claim as a tax credit?
d.If she had purchased the electric system for her principal residence and the solar heating system for a second residence,how much could she claim as a tax credit?