Question 1

Marvin and Pamela are married, file a joint return, and have two children, ages 9 and 11. Their combined AGI is $65,000. Marvin's earned income is $40,000; Pamela's is $25,000. They incur $6,500 of child care expenses to enable them to be employed during the current year. Their child and dependent care credit is

Accepted Answer

The answer of Marvin and Pamela are married, file a...

Question 2

Lee and Whitney incurred qualified adoption expenses in 2017 of $2,000, and then incurred $7,000 more in 2018 when the adoption of their child became final. Their 2017 AGI was $120,000 and their 2018 AGI was $140,000. The allowable adoption credit is

Accepted Answer

The adoption credit is claimed in the year the adoption becomes final. Since the adoption was finalized in 2018, the total expenses of $9,000 ($2,000 from 2017 and $7,000 from 2018) are claimed in 2018.

Question 3

In the fall of 2018, Gina went back to school to earn a master of taxation degree. She incurred $7,000 of qualified educational expenses and her modified AGI for the year was $59,000. Her Lifetime Learning Credit is

Accepted Answer

The Lifetime Learning Credit is 20% of the first $10,000 of qualified education expenses. Therefore, 20% of $7,000 is $1,400. However, the maximum credit per return is $2,000, so the full $1,400 is allowed.

Question 4

Mark and Stacy are married, file a joint return, and have one child, age 3. Their combined AGI is $55,000. Mark and Stacy incur $3,500 of child care expenses during the current year. Mark's employer reimburses him $1,500 under a qualified dependent care assistance plan. The child and dependent care credit is

Accepted Answer

The answer of Mark and Stacy are married, file a...

Question 5

Bud and Stella are married, file a joint return, and have one child, age 3. Their combined AGI is $35,000. Bud and Stella incur $3,500 of child care expenses during the current year. The child and dependent care credit is

Accepted Answer

The answer of Bud and Stella are married, file a...

Question 6

All of the following statements are true regarding the Lifetime Learning Credit except which one?

Accepted Answer

The Lifetime Learning Credit does not require a student to be enrolled at least half-time; it can be claimed for any course load.

Question 7

Current year foreign taxes paid exceed the ceiling based on U.S. tax attributable to foreign source income. These excess foreign tax credits

Accepted Answer

Excess foreign tax credits can be carried back one year and then carried forward ten years according to U.S. tax law.

Question 8

In the fall of 2018, James went back to school to earn a master of accountancy degree. He incurred $7,000 of qualified educational expenses and his modified AGI for the year was $40,000. His Lifetime Learning Credit is

Accepted Answer

The Lifetime Learning Credit is 20% of the first $10,000 of qualified education expenses. James incurred $7,000 of qualified educational expenses, so his Lifetime Learning Credit is $1,400 (20% x $7,000).

Question 9

The maximum amount of the American Opportunity Tax Credit for each qualified student is

Accepted Answer

The maximum amount of the American Opportunity Tax Credit is $2,500 per eligible student.

Question 10

Joe, who is single with modified AGI of $84,000, is sending his son to his first year of college. The total tuition and related payments during the year amounted to $18,000. Joe has not taken advantage of any other type of tax benefit related to educational expenses. His American Opportunity Tax Credit is

Accepted Answer

The American Opportunity Tax 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. Joe's son is in his first year of college, so Joe is eligible for the full $2,500 credit. However, Joe's modified AGI is $84,000, which is above the phase-out income limit for the credit. As a result, Joe's credit is reduced to $1,500.

Question 11

Kerry is single and has AGI of $25,000 in 2018. During the year he contributes $5,000 to his Roth IRA. What is the amount of qualified retirement savings contributions credit to which he is entitled?

Accepted Answer

The answer of Kerry is single and has AGI of...

Question 12

Evan and Barbara incurred qualified adoption expenses in 2017 of $6,000, and then incurred $9,000 more in 2018 when the adoption of their child became final. Their 2017 AGI was $110,000 and their 2018 AGI was $100,000. The allowable adoption credit is

Accepted Answer

The adoption credit is subject to a maximum limit per child, which was $13,810 in 2018. Since the adoption became final in 2018, they can claim the full credit amount of $13,810 in that year.

Question 13

Carlotta has $50,000 foreign- source income and $150,000 worldwide income. Her U.S. tax on her worldwide income is $30,290, and she paid foreign taxes of $9,000. What is the Carlotta's foreign tax credit?

Accepted Answer

The answer of Carlotta has $50,000 foreign- source income and...

Question 14

Margo and Jonah have two children, ages 13 and 17. Their modified AGI is $410,500. What is their child tax credit?

Accepted Answer

The child tax credit is $2,000 per qualifying child. However, the credit begins to phase out when modified AGI exceeds $400,000 for married couples filing jointly. For every $1,000 over the threshold, the credit is reduced by $50. Margo and Jonah's AGI is $10,500 over the threshold, reducing their credit by $525 per child, resulting in a total credit of $1,450.

Question 15

Which of the following statements is not correct regarding the residential energy efficient property (REEP) credit?

Accepted Answer

The answer of Which of the following statements is not...

Question 16

Patty, a single taxpayer, has $100,000 of U.S. source taxable income and $300,000 of foreign source taxable income from countries X and Y for a total worldwide taxable income of $400,000. Countries X and Y levy a total of $89,000 in foreign taxes upon the foreign source taxable income. U.S. taxes before credits are $115,690. The foreign tax credit limitation is

Accepted Answer

The foreign tax credit limitation is calculated as the ratio of foreign source taxable income to total worldwide taxable income, multiplied by the U.S. taxes before credits. Here, it is ($300,000 / $400,000) * $115,690 = $86,768.

Question 17

Timothy and Alice, who are married with modified AGI of $90,000, are sending their daughter to her first year of college. Their total tuition and related payments during the year amounted to $13,000. In addition, their daughter received a $10,000 scholarship to cover tuition. They have not taken advantage of any other type of tax benefit related to educational expenses. Their American Opportunity Tax Credit is

Accepted Answer

The American Opportunity Tax Credit allows for 100% of the first $2,000 of qualified education expenses and 25% of the next $2,000. After the $10,000 scholarship, $3,000 of expenses remain. Thus, they get $2,000 (100% of the first $2,000) + $250 (25% of the remaining $1,000) = $2,250.

Question 18

Carlotta has $50,000 foreign- source income and $150,000 worldwide income. Her U.S. tax on her worldwide income is $30,290, and she paid foreign taxes of $16,000. What is the Carlotta's foreign tax credit?

Accepted Answer

The foreign tax credit is calculated as the lesser of the foreign taxes paid ($16,000) or the U.S. tax on the foreign-source income. The U.S. tax on the foreign-source income is calculated as ($50,000 / $150,000) * $30,290 = $10,097. Therefore, the foreign tax credit is $10,097.

Question 19

Jeffery and Cassie, who are married with modified AGI of $90,000, are sending their son to his first year of college. Their total tuition and related payments during 2018 amounted to $5,500. They have not taken advantage of any other type of tax benefit related to educational expenses. Their American Opportunity Tax Credit for 2018 is

Accepted Answer

The American Opportunity Tax Credit allows for a maximum credit of $2,500 per eligible student. It covers 100% of the first $2,000 of qualified education expenses and 25% of the next $2,000. Therefore, for $5,500 in expenses, they can claim the full $2,500 credit.

Question 20

Marguerite and Josephus have two children, ages 13 and 10. Their modified AGI is $410,500. What is their child tax credit?

Accepted Answer

The answer of Marguerite and Josephus have two children, ages...

Quiz 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals