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Exam 12: Tax Credits and Payments

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Question 21

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Bradley has two college-age children, Clint, a freshman at State University, and Abigail, a junior at Northwest University. Both Clint and Abigail are full­time students. Clint's expenses during the 2014 fall semester are as follows: $2,400 tuition, $250 books and course materials, and $1,600 room and board. Abigail's expenses for the 2014 calendar year are as follows: $10,200 tuition, $1,200 books and course materials, and $3,600 room and board. Tuition and the applicable room and board costs are paid at the beginning of each semester. Bradley is married, files a joint tax return, claims both children as dependents, and has a combined AGI with his wife of $114,000 for 2014. Determine Bradley's available education tax credit for 2014.

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In 2014, both Clint and Abigail qualify ...

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Question 22

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The low-income housing credit is available to low-income tenants who reside in qualifying low-income housing.

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B) False

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Question 23

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Child care payments to a relative are not eligible for the credit for child and dependent care expenses if the relative is a child (under age 19) of the taxpayer.

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.

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

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

An employer calculates the amount of income tax withheld from salary or wages based on the information an employee provides on the following form:

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.

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.

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

Pat generated self-employment income in 2014 of $76,000. The self-employment tax 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?

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:

An employer's tax deduction for wages is affected by the work opportunity tax credit.

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

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

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.

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

Expenses that are reimbursed by a taxpayer's employer under a dependent care assistance program can also qualify for the credit for child and dependent care expenses.

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