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Exam 13: Tax Credits and Payment Procedures

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Question 61

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If a taxpayer is required to recapture any tax credit for rehabilitation expenditures,the recapture amount need not be added to the adjusted basis of the rehabilitation expenditures.

A) True
B) False

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Question 62

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Ahmad is considering making a $5,000 investment in a venture which its promoter promises will generate immediate tax benefits for him.Ahmad,who normally itemizes his deductions,is in the 28% marginal tax bracket.If the investment is of a type where the taxpayer may claim either a tax credit of 25% of the amount of the expenditure or an itemized deduction for the amount of the investment,what treatment normally would be most beneficial to Ahmad and by how much will Ahmad's tax liability decline because of the investment?

A) $0, take neither the itemized deduction nor the tax credit.
B) $1,250, take the tax credit.
C) $1,400, take the itemized deduction.
D) Both options produce the same benefit.
E) None of the above.

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

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Question 63

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The additional Medicare taxes assessed on high-income individuals carry differing tax rates depending on the tax base.

Which of the following issues does not need resolution in an employer's effort to comply with employment tax payment requirements?

Several years ago,Sarah purchased a structure for $150,000 that was originally 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:

An employee with outside income may be able to avoid the penalty for underpayment of estimated tax by having his employer increase income tax withholdings.

In the event that overwithholding of FICA tax occurs because the taxpayer has more than one employer,the excess amount should be claimed as a credit on the Federal income tax return of the employee.

Amber is in the process this year of renovating the office building (originally placed in service in 1976) used by her business.Because of current Federal Regulations that require the structure to be accessible to handicapped individuals,she incurs an additional $11,000 for various features,such as ramps and widened doorways,to make her office building more accessible.The $11,000 incurred will produce a disabled access credit of what amount?

A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is age 13 or less.

A FIFO method is applied to general business credit carryovers,carrybacks,and utilization of credits earned during a particular year.

In May 2008,Cindy incurred qualifying rehabilitation expenditures of $500,000 on a certified historic structure and properly claimed the tax credit for rehabilitation expenditures.In March 2012,she sold the building at a loss.Calculate the rehabilitation expenditures credit recapture that she must report in 2012.

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

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

Unused foreign tax credits can be carried back one year and forward fifteen years.

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.

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

A taxpayer who meets the age requirement and receives no Social Security benefits will be entitled to the full tax credit for the elderly.

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.

In describing FICA taxes,which (if any) of the following statements is incorrect?

If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp,the cost of the ramp qualifies for the disabled access credit.