Question 1

Certain high­income individuals are subject to three additional Medicare taxes beginning in 2013-on wages,unearned income,and tax credits claimed.

Accepted Answer

The additional Medicare taxes are assessed only on wages and unearned income.

Question 2

Several years ago,Sarah purchased a structure for $150,000 that was originally placed in service in 1929.In the current year,she incurred qualifying rehabilitation expenditures of $200,000.The amount of the tax credit for rehabilitation expenditures,and the amount by which the building's basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts:

Accepted Answer

Credit: $20,000 = $200,000 × 10%;basis increase: $180,000 = $200,000 (cost)- $20,000 (credit).

Question 3

Green Company,in the renovation of its building,incurs $9,000 of expenditures that qualify for the disabled access credit.The disabled access credit is:

Accepted Answer

$4,375 = ($9,000 - $250)× 50%.

Question 4

An employee with outside income may be able to avoid the penalty for underpayment of estimated tax by having his employer increase income tax withholdings.

Accepted Answer

By having an employer increase income tax withholdings, an employee can reduce or avoid the penalty for underpayment of estimated tax.

Question 5

Several years ago,Tom purchased a structure for $300,000 that was originally placed in service in 1929.Three and one-half years ago he incurred qualifying rehabilitation expenditures of $600,000.In the current year,Tom sold the property in a taxable transaction.Calculate the amount of the recapture of the tax credit for rehabilitation expenditures.

Accepted Answer

$24,000 = (40% × $600,000 × 10%).The structure was held for more than 3 years but less than 4 years.

Question 6

The additional Medicare taxes assessed on high-income individuals carry differing tax rates depending on the tax base.

Accepted Answer

An additional 0.9% tax is assessed on wages received in excess of specified amounts and an additional 3.8% tax is assessed on unearned income.

Question 7

Refundable tax credits include the:

Accepted Answer

The earned income credit is a refundable tax credit that is designed to help low-income earners. This credit can be returned to the taxpayer as a refund if the credit exceeds their tax liability, making it a refundable credit. The other options listed are non-refundable tax credits, meaning they can only reduce a person's tax liability and cannot be paid out as a refund.

Question 8

In March 2014,Gray Corporation hired two individuals,both of whom were certified as long-term recipients of family assistance benefits.Each employee was paid $11,000 during 2014.Only one of the individuals continued to work for Gray Corporation in 2015,earning $9,000 during the year.No additional workers were hired in 2015.Gray Corporation's work opportunity tax credit amounts for 2014 and 2015 are:

Accepted Answer

The maximum work opportunity tax credit in this case is 40% of the first $10,000 of qualified wages per employee paid in the first year of employment,plus 50% of the first $10,000 of qualified wages per employee paid in the second year of employment.Therefore,the 2014 credit amount is $8,000 (40% × $10,000 wages × 2 employees),while the 2015 credit amount is $4,500 (50% × $9,000 wages × 1 employee).

Question 9

Which,if any,of the following correctly describes the research activities credit?

Accepted Answer

The research activities credit is the sum of the incremental research credit,the basic research credit,and the energy research credit (option a. ).Qualifying expenditures not only are eligible for the credit,they also can be expensed in the year incurred (option b. ).S corporations and personal service corporations do not qualify for the basic research credit (option d. ).

Question 10

Molly has generated general business credits over the years that have not been utilized.The amounts generated and not utilized follow: $\begin{array}{rr}
2010 & \$ 2,500 \
2011 & 7,500 \
2012 & 5,000 \
2013 & 4,000
\end{array}$ In the current year,2014,her business generates an additional $15,000 general business credit.In 2014,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 2014 is available for future years?

Accepted Answer

The amount of general business credit generated in 2014 that is available for future years is $14,000. This is calculated by taking the total amount of general business credit generated in 2014 ($15,000) and subtracting the amount of general business credit that can be utilized in 2014 ($20,000).

Question 11

Roger is considering making a $6,000 investment in a venture that its promoter promises will generate immediate tax benefits for him.Roger,who does not anticipate itemizing his deductions,is in the 30% marginal income tax bracket.If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure,by how much will Roger's tax liability decline because of the investment?

Accepted Answer

The tax credit reduces Roger's tax liability by $2,400 ($6,000 × 40%).

Question 12

Ahmad is considering making a $10,000 investment in a venture which its promoter promises will generate immediate tax benefits for him.Ahmad,who normally itemizes his deductions,is in the 28% marginal tax bracket.If the investment is of a type where the taxpayer may claim either a tax credit of 25% of the amount of the expenditure or an itemized deduction for the amount of the investment,what treatment normally would be most beneficial to Ahmad and by how much will Ahmad's tax liability decline because of the investment?

Accepted Answer

The tax deduction will produce a benefit of $2,800 ($10,000 × 28%),which is greater than the amount resulting from claiming a tax credit,$2,500 ($10,000 × 25%).Therefore,Ahmad should claim the itemized deduction because it produces the greater benefit.

Question 13

The components of the general business credit include all of the following except:

Accepted Answer

All of the options listed (A through D) are indeed components of the general business credit. The general business credit is a consolidation of various individual credits available to businesses for certain activities, including providing child care facilities, making their premises accessible to disabled individuals, conducting research, and rehabilitating buildings.

Question 14

Amber is in the process this year of renovating the office building (originally placed in service in 1976)used by her business.Because of current Federal Regulations that require the structure to be accessible to handicapped individuals,she incurs an additional $11,000 for various features,such as ramps and widened doorways,to make her office building more accessible.The $11,000 incurred will produce a disabled access credit of what amount?

Accepted Answer

$5,000 = [($10,250 - $250)× 50%].

Question 15

Which of the following best describes the treatment applicable to unused business credits?

Accepted Answer

Unused business credits can be carried back one year and then carried forward for 20 years according to the U.S. tax code.

Question 16

During the year,Green,Inc. ,incurs the following research expenditures: In-house wages,supplies,computer time $60,000
Paid to Blue Foundation for research 30,000
Green's qualifying research expenditures for the year are:

Accepted Answer

$79,500 = $60,000 + ($30,000 × 65%).

Question 17

An expatriate who works in a country with an income tax rate higher than the U.S.rate probably will find the foreign earned income exclusion preferable to the foreign tax credit.

Accepted Answer

Just the opposite is the case.

Question 18

Black Company paid wages of $180,000,of which $40,000 was qualified wages for the work opportunity tax credit under the general rules.Black Company's deduction for wages for the year is:

Accepted Answer

$164,000 = [$180,000 - ($40,000 × 40%)].

Question 19

Cardinal Corporation hires two persons certified to be eligible employees for the work opportunity tax credit under the general rules (e.g. ,food stamp recipients),each of whom is paid $9,000 during the year.As a result of this event,Cardinal Corporation may claim a work opportunity credit of:

Accepted Answer

$4,800 = ($6,000 × 40% × 2).

Question 20

Which of the following correctly describes the tax credit for rehabilitation expenditures?

Accepted Answer

The tax credit for rehabilitation expenditures only applies to the rehabilitation of buildings that are used for business or income-producing purposes. Personal use property does not qualify.

Quiz 13: Tax Credits and Payment Procedures

Certain highincome individuals are subject to three additional Medicare taxes beginning in 2013-on wages,unearned income,and tax credits claimed.

Green Company,in the renovation of its building,incurs $9,000 of expenditures that qualify for the disabled access credit.The disabled access credit is:

An employee with outside income may be able to avoid the penalty for underpayment of estimated tax by having his employer increase income tax withholdings.

The additional Medicare taxes assessed on high-income individuals carry differing tax rates depending on the tax base.

Refundable tax credits include the:

Which,if any,of the following correctly describes the research activities credit?

The components of the general business credit include all of the following except:

Which of the following best describes the treatment applicable to unused business credits?

During the year,Green,Inc. ,incurs the following research expenditures: In-house wages,supplies,computer time $60,000 Paid to Blue Foundation for research 30,000 Green's qualifying research expenditures for the year are:

An expatriate who works in a country with an income tax rate higher than the U.S.rate probably will find the foreign earned income exclusion preferable to the foreign tax credit.

Black Company paid wages of $180,000,of which $40,000 was qualified wages for the work opportunity tax credit under the general rules.Black Company's deduction for wages for the year is:

Cardinal Corporation hires two persons certified to be eligible employees for the work opportunity tax credit under the general rules (e.g. ,food stamp recipients) ,each of whom is paid $9,000 during the year.As a result of this event,Cardinal Corporation may claim a work opportunity credit of:

Which of the following correctly describes the tax credit for rehabilitation expenditures?

Quiz 13: Tax Credits and Payment Procedures

Certain high­income individuals are subject to three additional Medicare taxes beginning in 2013-on wages,unearned income,and tax credits claimed.

Green Company,in the renovation of its building,incurs $9,000 of expenditures that qualify for the disabled access credit.The disabled access credit is:

An employee with outside income may be able to avoid the penalty for underpayment of estimated tax by having his employer increase income tax withholdings.

The additional Medicare taxes assessed on high-income individuals carry differing tax rates depending on the tax base.

Refundable tax credits include the:

Which,if any,of the following correctly describes the research activities credit?

The components of the general business credit include all of the following except:

Which of the following best describes the treatment applicable to unused business credits?

During the year,Green,Inc. ,incurs the following research expenditures: In-house wages,supplies,computer time $60,000 Paid to Blue Foundation for research 30,000 Green's qualifying research expenditures for the year are:

An expatriate who works in a country with an income tax rate higher than the U.S.rate probably will find the foreign earned income exclusion preferable to the foreign tax credit.

Black Company paid wages of $180,000,of which $40,000 was qualified wages for the work opportunity tax credit under the general rules.Black Company's deduction for wages for the year is:

Cardinal Corporation hires two persons certified to be eligible employees for the work opportunity tax credit under the general rules (e.g. ,food stamp recipients) ,each of whom is paid $9,000 during the year.As a result of this event,Cardinal Corporation may claim a work opportunity credit of:

Which of the following correctly describes the tax credit for rehabilitation expenditures?

Certain highincome individuals are subject to three additional Medicare taxes beginning in 2013-on wages,unearned income,and tax credits claimed.