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Exam 13: Tax Credits and Payment Procedures

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Question 51

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

A) True
B) False

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Question 52

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

A) True
B) False

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Question 53

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Jack and Jill are married, have three children, and they report earnings during 2019 of $28,500.Do they qualify for the earned income credit? If so, calculate the amount of credit that is available to them.

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

Golden Corporation is an eligible small business for purposes of the disabled access credit.During the year, Golden makes the following expenditures on a structure originally placed in service in 1988: $\begin{array} { l l } \text { Removal of architectural barriers } & \$ 8,500 \\\text { Acquired equipment for disabled persons } & \underline { 6,250 } \\& \underline { \underline { \$ 14,750 } }\end{array}$ In addition, Golden expended $8,000 on a building originally placed in service in the current year to ensure easy accessibility by disabled individuals.Calculate the amount of the disabled access credit available to Golden.

During the current year, Eleanor earns $120,000 in wages as an employee of an accounting firm.She also earns $13,000 in gross income from an outside consulting service she operates.Deductible expenses paid in connection with the consulting service amount to $3,000.Eleanor also incurs a recognized long-term capital gain of $1,000 from the sale of a stock investment.She must pay a self-employment tax on:

In January 2019, Tammy acquired an office building in downtown Syracuse, NY, for $400,000.The building was constructed in 1932 and is a certified historic structure.Of the $400,000 cost, $40,000 was allocated to the land.Tammy immediately placed the building into service, but she quickly realized that substantial renovation would be required to keep and attract new tenants.The renovations costing $600,000 were of the type that qualifies for the rehabilitation credit.The improvements were completed in October 2019. a.Compute Tammy's rehabilitation tax credit for the year of acquisition. b.Determine the cost recovery deduction for 2019. c.What is the basis in the property at the end of its first year of use by Tammy?

Which of the following correctly describes the tax credit for rehabilitation expenditures?

Several years ago, Sarah purchased a certified historic structure for $150,000 that was placed in service in 1929.In the current year, she incurred qualifying rehabilitation expenditures of $200,000.The amount of the tax credit for rehabilitation expenditures and the amount by which the building's basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts.

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

Phil and Ling, husband and wife, both are employed by Laurel Corporation.Phil earns $135,000 in salary in 2019, and Ling earns $70,000.How much FICA tax must they pay for 2019?

Juan refuses to give the bank where he maintains a savings account his Social Security number.He is subject to backup withholding for the interest earned on the savings account.

Identify the following statement that is false.

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

During 2019, Barry (who is single and has no children) earned a salary of $13,100.He is age 30.His earned income credit for the year is:

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

Rick spends $750,000 to build a qualified low-income housing project, which is placed in service on January 1, 2019. He financed the project using his personal funds.What is the amount of the low-income housing credit that Rick may claim in 2019 (assuming a rate of 7.40%)? What is the total amount of the credit that Rick may claim as a result of the $750,000 expenditure?

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

Jermaine and Kesha are married, file a joint tax return, have AGI of $82,500, and have two children.Devona is beginning her freshman year at State University during fall 2019, and Arethia is beginning her senior year at Northeast University during fall 2019 after having completed her junior year during the spring of that year.Both Devona and Arethia are claimed as dependents on their parents' tax return. Devona's qualifying tuition expenses and fees total $4,000 for the fall semester and Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2019.Full payment is made for the tuition and related expenses for both children during each semester.The American Opportunity credit available to Jermaine and Kesha for 2019 is:

The child tax credit is based on the number of the taxpayer's qualifying children under age 17.