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Exam 17: Business Tax Credits and Corporate Alternative Minimum Tax

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Question 21

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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:

A) $1,440.
B) $2,880.
C) $4,800.
D) $7,200.
E) None of the above.

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

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Question 22

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In June, Della purchases a building for $800,000 to use in her business as an office building. Della uses the depreciation method which will provide her with the greatest deduction for regular income tax purposes. ​ a.​Calculate the AMT adjustment for depreciation in 2016 if Della purchased the building in 2016. b.Calculate the AMT preference for depreciation in 2016 if Della purchased the building in 1986.

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Question 23

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

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, 2016, her business generates an additional $15,000 general business credit. In 2016, 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 2016 is available for future years?

The incremental research activities credit is 20% of the qualified research expenses that exceed the base amount.

A small employer incurs $1,500 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 $750.

Some (or all) of the tax credit for rehabilitation expenditures will have to be recaptured if the rehabilitated property is disposed of prematurely or if it ceases to be qualifying property.

C corporations are not required to make AMT adjustments for depreciation.

Unless circulation expenditures are amortized over a three-year period for regular income tax purposes, there will be an AMT adjustment.

In March 2016, 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 2016. Only one of the individuals continued to work for Gray Corporation in 2017, earning $9,000 during the year. No additional workers were hired in 2017. Gray Corporation's work opportunity tax credit amounts for 2016 and 2017 are:

Qualified research and experimentation expenditures are not only eligible for the 20% tax credit, but also can be expensed in the year incurred.

Since most tax preferences are merely timing differences, they eventually will reverse and net to zero.

All foreign taxes qualify for the foreign tax credit.

The AMT exemption for a C corporation is $50,000 reduced by 25% of the amount by which AMTI exceeds $150,000.

The work opportunity tax credit is available only for wages paid to qualifying individuals during their first year of employment.

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.

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:

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?

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

Discuss the treatment of unused general business credits.