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Exam 12: Tax Credits and Payments

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Question 31

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Bob and Sally are married,file a joint tax return,have AGI of $108,000,and have two children.Del is beginning her freshman year at State College during Fall 2010,and Owen is beginning his senior year at Southwest University during Fall 2010.Owen completed his junior year during the Spring semester of 2009 (i.e. ,he took a "leave of absence" during the 2009-2010 school year) .Both Del and Owen are claimed as dependents on their parents' tax return.Del's qualifying tuition expenses and fees total $5,000 for the Fall semester,while Owen's qualifying tuition expenses were $6,100 for the Fall 2010 semester.Del's room and board costs were $3,200 for the Fall semester.Owen did not incur room and board costs since he lived with his aunt and uncle during the year.Full payment is made for the tuition and related expenses for both children at the beginning of each semester.In addition to the children's college expenses,Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist.Bob attended the seminars during July and August 2010.Compute the available education tax credits for Bob and Sally for 2010.

A) $3,100.
B) $5,000.
C) $5,360.
D) $5,600.
E) None of the above.

F) C) and E)
G) A) and B)

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Question 32

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Which,if any,of the following correctly describes the earned income credit?

A) Would be available regardless of the amount of the taxpayer's adjusted gross income.
B) Not available to a surviving spouse.
C) A taxpayer must have a qualifying child to take advantage of the credit.
D) Is a refundable credit.
E) None of the above.

F) B) and C)
G) A) and D)

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Question 33

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In May 2006,Alma incurred qualifying rehabilitation expenditures of $400,000 on a certified historic structure and properly claimed the tax credit for rehabilitation expenditures.In March 2010,she sold the building at a loss.Calculate the rehabilitation expenditures credit recapture that she must report in 2010.

Tom,unmarried,pays Heloise (a housekeeper) $4,900 to care for his physically incapacitated mother so that he can be gainfully employed.He has AGI of $85,000 and claims his mother as a dependent.Tom may claim a credit for child and dependent care expenses of:

In May 2010,Blue Corporation hired Camilla,Jolene,and Tyrone,all of whom are certified as long-term family assistance recipients.Each employee is paid $12,000 during 2010.Camilla and Tyrone continued to work for Blue Corporation in 2011,earning $14,000 each.Blue hired no additional employees during 2011.

A taxpayer who qualifies for the low-income housing credit claims the credit over a 10-year period.

A taxpayer's earned income credit is dependent on the number of his or her qualifying children.

Both education tax credits are available for qualified tuition expenses,and in certain instances,also may be available for room and board.

Because current U.S.corporate income tax rates are higher than many foreign corporate income tax rates,the overall limitation does not yield a lower foreign tax credit than the amount of foreign taxes actually paid.

Which of the following statements is true regarding the education tax credits?

George and Jill are husband and wife,ages 67 and 65 respectively.During the year,they receive Social Security benefits of $4,000 and have adjusted gross income of $11,000.Assuming they file a joint return,their tax credit for the elderly,before considering any possible limitation due to their tax liability,is:

Summer Corporation's business is international in scope and is subject to income taxes in several countries.Summer's earnings and income taxes paid in the relevant foreign countries are: If Summer Corporation's worldwide income subject to taxation in the United States is $2,400,000 and the U.S.income tax due prior to the foreign tax credit is $816,000,compute the allowable foreign tax credit.If,instead,the total foreign income taxes paid were $550,000,compute the allowable foreign tax credit.

Phil and Audrey,husband and wife,are both employed by Laurel Corporation.Phil earns $108,000 in salary in 2010,and Audrey earns $70,000.How much FICA tax must they pay for 2010?

The purpose of the tax credit for rehabilitation expenditures is to encourage the relocation of businesses from older,economically distressed areas (i.e. ,inner city)to newer locations.

Only self-employed individuals are required to make estimated tax payments.

The earned income credit,a form of a negative income tax,is a refundable credit.

Realizing that providing for a comfortable retirement is up to them,Jim and Julie commit to making regular contributions to their IRAs,beginning this year.Consequently,they each make a $2,000 contribution to their traditional IRA.If their AGI is $37,000 on their joint return,what is the amount of their credit for certain retirement plan contributions?

How does the FICA tax compare to the self-employment tax? How are these two taxes similar and how do they differ?

The education tax credits (i.e. ,the American Opportunity credit and the lifetime learning credit)are available to help defray the cost of higher education regardless of the income level of the taxpayer.

The calculation of FICA and the self-employment tax both involve two components: the Social Security portion and the Medicare portion,each portion of which is imposed on the same base amounts.