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Exam 12: Tax Credits and Payments

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Question 41

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Qualifying tuition expenses paid from the proceeds of a tax-exempt scholarship do not give rise to an education tax credit.

A) True
B) False

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Question 42

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The disabled access credit is computed at the rate of 50% of all access expenditures incurred by the taxpayer during the year.

A) True
B) False

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Question 43

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

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.

Explain the purpose of the disabled access credit and describe the general characteristics of its computation.

Harry and Wilma are married and file a joint income tax return. On their tax return, they report $44,000 of adjusted gross income ($20,000 salary earned by Harry and $24,000 salary earned by Wilma) and claim two exemptions for their dependent children. During the year, they pay the following amounts to care for their 4-year old son and 6-year old daughter while they work. Harry and Wilma may claim a credit for child and dependent care expenses of:

Explain the purpose of the tax credit for rehabilitation expenditures and describe the general characteristics of its computation.

Dabney and Nancy are married, both gainfully employed, and have two children who are 3 and 6 years old.Dabney's salary is $35,000 while Nancy's salary is $40,000.During the year, they spend $7,000 for child care expenses that are required so both of them can work outside of the home.Calculate the credit for child and dependent care expenses.

Refundable tax credits include the:

Qualified rehabilitation expenditures include the cost of acquiring the building, but not the cost of acquiring the land.

If a taxpayer chooses to claim a foreign tax credit, part of the foreign income taxes paid can also be claimed as a deduction.

A small employer incurs $1,600 for consulting fees related to establishing a qualified retirement plan for its 75 employees.As a result, the employer may claim the credit for small employer pension plan startup costs for $800.

The disabled access credit was enacted to encourage small businesses to make their businesses more accessible to disabled individuals.

Which of the following statements regarding the adoption expenses credit is not true?

Child and dependent care expenses do not include amounts paid for general household services.

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:

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

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

Roger is considering making a $3,000 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?

Molly has generated general business credits over the years that have not been utilized.The amounts generated and not utilized follow: In the current year, 2012, her business generates an additional $30,000 general business credit.In 2012, based on her tax liability before credits, she can utilize a general business credit of up to $40,000.After utilizing the carryforwards and the current year credits, how much of the general business credit generated in 2012 is available for future years?