Molly has generated general business credits over the years that have not been utilized.The amounts generated and not utilized equal: $$\begin{array} { l r }
2015 & \$ 2,500 \
2016 & 7,500 \
2017 & 5,000 \
2018 & 4,000
\end{array}$$ In the current year, 2019, her business generates an additional $15,000 general business credit.In 2019, based on her tax liability before credits, she can utilize a general business credit of up to $20,000.After utilizing the carryforwards and the current year credits, how much of the general business credit generated in 2019 is available for future years?

Question

Molly has generated general business credits over the years that have not been utilized.The amounts generated and not utilized equal: $$\begin{array} { l r } 
2015 & \$ 2,500 \
2016 & 7,500 \
2017 & 5,000 \
2018 & 4,000
\end{array}$$ In the current year, 2019, her business generates an additional $15,000 general business credit.In 2019, based on her tax liability before credits, she can utilize a general business credit of up to $20,000.After utilizing the carryforwards and the current year credits, how much of the general business credit generated in 2019 is available for future years?

Quizplus · Accepted Answer

Molly has general business credits that have not been utilized, the amount of which is unknown. However, we do know that she generated an additional $15,000 general business credit in 2019 and she can utilize a general business credit of up to $20,000 based on her tax liability before credits in the current year.

Let's assume her tax liability before credits is $50,000. She can utilize up to $20,000 in general business credit, so her tax liability after credits is $30,000. She has general business credits that have been generated in the past but not utilized, so she can use those to reduce her tax liability further. Let's say she has $10,000 in carryforwards. This means her tax liability after utilizing the carryforwards is $20,000.

Now, the $15,000 general business credit generated in 2019 can only be used to reduce her tax liability in the current year. Since she has already utilized $20,000 in general business credit, the remaining $5,000 of the 2019 credit cannot be used to reduce her tax liability in the current year. Instead, it will carry forward to future years and be available for use in those years.

Therefore, the answer is C) $14,000.

Molly Has Generated General Business Credits Over the Years That 2015$2,50020167,50020175,00020184,000\begin{array} { l r } 2015 & \$ 2,500 \\2016 & 7,500 \\2017 & 5,000 \\2018 & 4,000\end{array}2015201620172018​$2,5007,5005,0004,000​

Molly Has Generated General Business Credits Over the Years That $\begin{array} { l r } 2015 & \$ 2,500 \\2016 & 7,500 \\2017 & 5,000 \\2018 & 4,000\end{array}$