Layla earned $20,000 of general business credits from her sole proprietorship.Her regular tax liability is $45,000,and her tentative minimum tax is $49,000.During the current year Layla will apply general business credits of
A)$0.
B)$4,000.
C)$20,000.
D)$45,000.

Question

Quizplus · Accepted Answer

Layla cannot apply any general business credits because her tentative minimum tax ($49,000) is higher than her regular tax liability ($45,000), which means she is subject to the alternative minimum tax (AMT) and cannot use the credits to reduce her tax liability.

Layla Earned $20,000 of General Business Credits from Her Sole