Question 1

Courtney and Ralph are married,file a joint return,and have two dependent children,ages 10 and 12.Their combined income is $114,000.By how much is their child credit reduced in 2011?

Accepted Answer

E

Question 2

Which of the following statements is not correct?

Accepted Answer

Taxpayers cannot take both the American Opportunity credit and the Lifetime Learning credit for the same student in the same year. They can only choose one of the credits per student per year.

Question 3

In regards to the alternative minimum tax (AMT):

Accepted Answer

State income tax refunds are not considered income for AMT purposes because state income taxes are not deductible under AMT rules.

Question 4

Mr.and Mrs.Darling are in the process of adopting two children.Their adjusted gross income for 2011 is $135,000. During 2011,their adoption of a baby girl from Florida became finalized.They paid adoption expenses of $5,000 during 2010 and $7,000 during 2011.
The Darlings also paid $2,500 during 2010 and $4,000 during 2011 for the adoption of a boy from South Carolina.This adoption is not finalized until 2012.
On their 2011 tax return,how much may the Darlings take as an adoption credit?

Accepted Answer

The answer of Mr.and Mrs.Darling are in the process of...

Question 5

Marge and Lester file a joint tax return for 2011,with adjusted gross income of $33,000.Marge and Lester earned income of $20,000 and $12,000 respectively,during 2011.In order for Marge to be gainfully employed,they pay the following child care expenses for their 4-year-old son,Kevin:  Assuming they do not claim any other credits against their tax,what is the amount of the child and dependent care credit they should report on their tax return for 2011?

Accepted Answer

The answer of Marge and Lester file a joint tax...

Question 6

Which of the following lists only community property states?

Accepted Answer

Community property refers to property acquired during marriage that is owned equally by both spouses. Arizona, Nevada, and Texas are the only states that follow community property laws.

Question 7

Brenda and Mike are married and live in Washington.They have the following income:  If Mike and Brenda file separate returns,how much income would Brenda report on her federal tax return?

Accepted Answer

The answer of Brenda and Mike are married and live...

Question 8

Mr.French had the following income and taxes:  Calculate the amount of the foreign tax credit.

Accepted Answer

The foreign tax credit is calculated as the lesser of the foreign taxes paid or the US tax liability on the income earned from foreign sources. From the given income and taxes, we can calculate the US tax liability on foreign income as follows:

Foreign income = $30,000
Foreign taxes paid = $6,000
US tax liability on foreign income = (Foreign income / Total income) x Total tax liability
= (30,000 / 80,000) x 20,000
= $7,500

Since the foreign taxes paid ($6,000) are less than the US tax liability on foreign income ($7,500), the foreign tax credit will be equal to the foreign taxes paid, which is $6,000. However, since $6,000 exceeds the foreign tax credit limit of $3,000 for the current year, the maximum foreign tax credit allowable for the year is $3,000. Therefore, the answer is C, with a foreign tax credit of $3,000.

Question 9

In order to qualify for the child tax credit of $1,000 per child (before any phase-out),

Accepted Answer

The child must meet the requirements to be considered a "qualifying child" in order to be eligible for the child tax credit. Being under age 14 is one of the criteria, but citizenship and personal exemptions are not relevant to this credit.

Question 10

Which of these statements concerning the alternative minimum tax (AMT)is correct?

Accepted Answer

The alternative minimum tax rate for married taxpayers is 26 percent on the first $175,000 of alternative minimum taxable income.

Question 11

In the case of the adoption of a child who is a U.S.citizen or resident of the U.S. ,the credit for qualified adoption expenses incurred over several years is available:

Accepted Answer

The credit for qualified adoption expenses is available in the year the adoption becomes final for expenses incurred in that year and the prior year. This means that if expenses were paid over several years, only the expenses incurred in the year of finalization and the prior year will qualify for the credit.

Question 12

Leonard is a junior at ESU and his parents have a 2011 tax liability of $6,000 before taking into account the American Opportunity credit.Leonard's parents paid $2,500 in qualifying expenses.Leonard was a full-time student,and was claimed as a dependent by his parents.What is the amount of the American Opportunity credit allowed on the parents' 2011 tax return? Assume there is no income limitation.

Accepted Answer

The American Opportunity credit is a tax credit for qualified education expenses paid for the first four years of post-secondary education. The maximum credit is $2,500 per eligible student. Leonard's parents paid $2,500 in qualifying expenses, so they are eligible for the maximum credit.

Question 13

Mr.and Mrs.Brown adopted a child in 2011.During 2011,Mrs.Brown's employer pays $3,000 of her adoption expenses.The Browns also pay $12,300 out of their pocket during 2011.Their AGI is $100,000.Which of the following are accurate?

Accepted Answer

The $3,000 of adoption expenses will not be included as wages on Mrs. Brown's W-2 and the Browns will also be able to claim a $12,300 adoption credit on their 2011 tax return.

Question 14

Rick has net taxable income of $20,000 from Country Z which imposes a 40 percent income tax.Rick also has net taxable income from U.S.sources of $80,000,and U.S.tax liability,before the foreign tax credit,of $22,000.What is the amount of Rick's foreign tax credit?

Accepted Answer

The answer of Rick has net taxable income of $20,000...

Question 15

In 2011,Alexis has income from wages of $17,000,adjusted gross income of $19,000,and tax liability of $200 before the earned income credit.She has one qualifying child.What is the amount of Alexis' earned income credit for 2011?

Accepted Answer

To calculate the earned income credit for 2011, we need to first find Alexis' earned income. This is simply her income from wages, which is $17,000. Next, we need to know the maximum credit amount for someone with one qualifying child and earned income of $17,000. According to the IRS earned income credit tables for 2011, this would be $2,721. However, since Alexis' tax liability before the credit is only $200, her maximum credit amount is limited to $200. Therefore, the amount of Alexis' earned income credit for 2011 is $200.

Question 16

Nine states have a community property system of marital law.Which of the following statements is correct?

Accepted Answer

In some community property states, separate property can give rise to community income. This means that if separate property is used to generate income during the marriage, that income may be considered community property and subject to division in a divorce. The other statements are incorrect:
A) Federal law does not determine how income is allocated in community property states.
B) Separate property does not automatically become community property after marriage in community property states.
D) Married couples in community property states filing joint tax returns allocate their income according to federal tax law, not state community property laws.
E) The treatment of personal earnings in community property states can vary depending on the circumstances and the specific state law.

Question 17

Mike and Mindy have two children,Sarah and Jake.Sarah has interest and dividend income of $2,200.Jake has interest and dividend income of $750.For 2011,Mike and Mindy have taxable income of $76,000 which puts them in the 25 percent federal tax bracket.If each child files his/her own tax return,what is Sarah and Jake's tax liability?

Accepted Answer

Sarah's interest and dividend income of $2,200 is below the standard deduction of $2,350 for single taxpayers in 2011, so she would not owe any federal income tax. 
Jake's interest and dividend income of $750 is also below the standard deduction, so he would not owe any federal income tax. Therefore, their tax liability is $0 each.

Question 18

The earned income credit:

Accepted Answer

The earned income credit is based upon the adjusted gross income, the number of qualifying children, and the filing status of the taxpayer. It is not a non-refundable credit and there are income limits to qualify. The taxpayer must also meet certain criteria such as having a valid Social Security number and being a U.S. citizen or resident alien.

Question 19

In order to claim the child and dependent care credit:

Accepted Answer

The child and dependent care credit is only available for dependents under age 13 or any age if incapable of self-care. Choices A and C are incorrect; a child of divorced parents can be claimed by the custodial or non-custodial parent depending on the terms of the divorce agreement, and overnight camps typically do not qualify as child care expenses. Choice B is partially correct but incomplete; the amount of the credit does depend on taxable income, but there are also limits on the amount of qualifying expenses that can be claimed.

Question 20

Sally and Jack have two children,Thornton (age 13)and Sirah (age 8).For 2011,there is a total parental tax of $5,500 related to the children's income.Thornton's net unearned income is $14,000,while Sirah's net unearned income is $6,000.How much of the parental tax would be allocated to Thornton on his 2011 tax return?

Accepted Answer

Thornton's net unearned income is higher than Sirah's, so a larger portion of the parental tax would be allocated to him. The allocation is based on the proportion of each child's net unearned income to the total net unearned income of both children. Thornton's share is ($14,000 / ($14,000 + $6,000)) * $5,500 = $3,850.

Quiz 6: Credits and Special Taxes

Courtney and Ralph are married,file a joint return,and have two dependent children,ages 10 and 12.Their combined income is $114,000.By how much is their child credit reduced in 2011?

Which of the following statements is not correct?

In regards to the alternative minimum tax (AMT) :

Which of the following lists only community property states?

Brenda and Mike are married and live in Washington.They have the following income: If Mike and Brenda file separate returns,how much income would Brenda report on her federal tax return?

Mr.French had the following income and taxes: Calculate the amount of the foreign tax credit.

In order to qualify for the child tax credit of $1,000 per child (before any phase-out) ,

Which of these statements concerning the alternative minimum tax (AMT) is correct?