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Exam 13: Tax Credits and Payment Procedures

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Question 61

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All taxpayers are eligible to take the basic research credit.

A) True
B) False

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Question 62

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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.

A) True
B) False

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Question 63

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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:

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?

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:

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

Discuss the treatment of unused general business credits.

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.

Any unused general business credit must be carried back 3 years and then forward for 20 years.

During the year,Green Corporation (a U.S.corporation) has U.S.-source income of $750,000 and foreign income of $500,000.The foreign-source income generates foreign income taxes of $240,000.The U.S.income tax before the foreign tax credit is $425,000.Green Corporation's foreign tax credit is:

Identify the statement below that is false.

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

Bob and Sally are married,file a joint tax return,have AGI of $112,000,and have two children.Del is beginning her freshman year at State College during Fall 2014,and Owen is beginning his senior year at Southwest University during Fall 2014.Owen completed his junior year during the Spring semester of 2013 (i.e. ,he took a "leave of absence" during the 2013-2014 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 2014 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 2014.Compute the available education tax credits for Bob and Sally for 2014.

The tax benefits resulting from tax credits and tax deductions are affected by the tax rate bracket of the taxpayer.

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

The tax credit for rehabilitation expenditures for certified historic structures differs from that for qualifying structures that are not certified historic structures.

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:

For the current year,the base amount for the Social Security portion (old age,survivors,and disability insurance)is different from that for the Medicare portion of FICA.

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

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