Question 1

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 for each qualified student is $2,500. Option A and B are too low, and Option D is incorrect.

Question 2

Carlotta,Inc.has $50,000 foreign-source income and $150,000 worldwide income.Its U.S.tax on its worldwide income is $42,000 and it paid foreign taxes of $16,000.What is the corporation's foreign tax credit?

Accepted Answer

The foreign tax credit is calculated based on the lesser of the foreign taxes paid or the U.S. tax on foreign-source income. In this case, the U.S. tax on foreign-source income is ($50,000/$200,000) x $42,000 = $10,500. Since the foreign taxes paid are $16,000, the foreign tax credit is limited to $10,500. Therefore, the correct answer is B, $14,000.

Question 3

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 answer of Joe,who is single with modified AGI of...

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 joint...

Question 5

Evan and Barbara incurred qualified adoption expenses in 2012 of $6,000,and then incurred $7,500 more in 2013 when the adoption of their child became final.Their 2012 AGI was $110,000 and their 2013 AGI was $100,000.The allowable adoption credit is

Accepted Answer

The adoption credit is claimed in the year the adoption becomes final. In 2013, they can claim the full amount of their qualified expenses, which is $13,500, as it is below the maximum allowable credit for that year.

Question 6

Marguerite and Josephus have two children,ages 13 and 10.Their modified AGI is $120,500.What is their child tax credit?

Accepted Answer

A)$120,500 - $110,000 = 10,500.10,500/1,000 = 10.5,rounded to 11.11 × 50 = $550 reduction.$1,000 - 550 = $450 credit.The two credits total $900.

Question 7

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 2013 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 2013 is

Accepted Answer

The American Opportunity Tax Credit allows for a credit of up to $2,500 per eligible student for the first four years of post-secondary education. The credit starts to phase out for taxpayers with a modified AGI of $80,000 ($160,000 for married filing jointly) and is completely phased out at a modified AGI of $90,000 ($180,000 for married filing jointly). Since Jeffery and Cassie have a modified AGI of $90,000, they are eligible for the full $2,500 credit.

Question 8

Unused foreign tax credits are carried back and forward how many years when the limitation is not exceeded?

Accepted Answer

The answer of Unused foreign tax credits are carried back...

Question 9

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 joint...

Question 10

Carlotta,Inc.has $50,000 foreign-source income and $150,000 worldwide income.Its U.S.tax on its worldwide income is $42,000 and it paid foreign taxes of $12,000.What is the corporation's foreign tax credit?

Accepted Answer

B)The foreign taxes paid of $12,000 are lower than the limitation of $14,000.[(50,000/150,000)× 42,000] =$14,000

Question 11

A corporation 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 $60,000 in foreign taxes upon the foreign source taxable income.U.S.taxes before credits are $140,000.The foreign tax credit limitation is

Accepted Answer

B)Foreign tax credit equals the lesser of foreign taxes paid or accrued ($60,000)or the portion of the U.S.income tax liability attributable to income earned in all foreign countries ($300,000/$400,000 × $140,000 = $105,000).

Question 12

Which of the following statements regarding the Work Opportunity Tax Credit (WOTC)for hiring veterans is not correct?

Accepted Answer

Eligibility for the WOTC for hiring veterans is not based on whether the individual served in a combat zone. Rather, eligibility is based on various factors such as length of unemployment after leaving active duty, service-related disability, and other criteria.

Question 13

Lee and Whitney incurred qualified adoption expenses in 2012 of $2,000,and then incurred $7,000 more in 2013 when the adoption of their special needs child became final.Their 2012 AGI was $120,000 and their 2013 AGI was $140,000.The allowable adoption credit is

Accepted Answer

The maximum adoption credit for each year is $6,000 indexed for inflation, which brings it up to $12,970 in 2013. Lee and Whitney can claim the full credit of $12,970 on their 2013 tax return because their AGI did not exceed the phaseout amount for that year. They cannot claim any credit for the $2,000 of expenses they incurred in 2012 because they did not finalize the adoption until 2013.

Question 14

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 child and dependent care credit is calculated as a percentage of eligible expenses, with a maximum credit of $3,000 for one child. The percentage ranges from 20% to 35%, depending on the taxpayer's AGI. In this case, Bud and Stella's AGI is below $43,000, so they are eligible for a 35% credit on up to $3,000 of child care expenses. Therefore, their credit would be $3,000 x 35% = $1,050. However, since their actual expenses were only $3,500, their credit is limited to that amount. Therefore, their child and dependent care credit is $750.

Question 15

The general business credit includes all of the following with the exception of

Accepted Answer

The foreign tax credit does not fall under the general business credit. It is a separate credit that applies to taxes paid to foreign countries on income that is also subject to US taxes.

Question 16

Which of the following is not a qualifying property for the residential energy efficient property (REEP)credit?

Accepted Answer

Geothermal heat pumps, residential wind property, and solar hot water heaters are all qualifying properties for the REEP credit. However, metal or asphalt roofs with special coatings do not qualify for the REEP credit.

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 answer of Timothy and Alice,who are married with modified...

Question 18

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

Accepted Answer

The answer of All of the following statements are true...

Question 19

Kerry is single and has AGI of $25,000 in 2013.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

Kerry is entitled to a credit of 10% of his contribution, which is $500. However, the credit is phased out for taxpayers with AGIs above certain levels. For 2013, the phase-out begins at $50,000 for single filers. Since Kerry's AGI is $25,000, he is entitled to the full $500 credit.

Question 20

In the fall of 2013,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 equal to 20% of the first $10,000 of qualified educational expenses, for a maximum credit of $2,000. However, the credit phases out for taxpayers with modified AGI between $59,000 and $69,000 for single filers or between $118,000 and $138,000 for married filing jointly. Since James' modified AGI is below the phase-out range, he is eligible for the full credit of 20% of $7,000, which is $1,400. Therefore, the best choice is B.

Quiz 14: Special Tax Computation Methods, tax Credits, and Payment of Tax