Angel Corporation's current-year regular tax liability is $40,000. Angel is eligible for a general business credit of $45,000. The corporation will receive a $5,000 refund of federal income tax.

Question

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Angel Corporation can use the general business credit up to the amount of its tax liability, which is $40,000, reducing its tax liability to $0. The excess $5,000 cannot be refunded but may be carried back or forward to other tax years under general business credit rules.

Angel Corporation's Current-Year Regular Tax Liability Is $40,000