Question 1

Suzanne, a single taxpayer, has the following tax information for the current year. • Charitable contribution of real property with a FMV of $25,000 (adjusted basis $20,000)for which a $25,000 deduction was taken.
• Research and experimental expenses of $40,000 deducted in full for regular tax.
Suzanne's total tax preferences and adjustments equals

Accepted Answer

A)  $5,000.
B)  $36,000.
C)  $41,000.
D)  $45,000. B

Question 2

Hawaii, Inc., began a child care facility for its employees during the year. The corporation incurred the following expenses:
  What is the amount of Hawaii's credit for employer-provided child care?

Accepted Answer

The credit is ($138,000 × .25)+ ($10,000 × .10)= ($34,500)+ ($1,000)= $35,500. The credit will reduce the deductible expenses.

Question 3

Qualified tuition and related expenses eligible for the American Opportunity Tax Credit are limited to those incurred the first two years of postsecondary education.

Accepted Answer

A) True 
 B)False  False

Question 4

Rex has the following AMT adjustments: -Depreciation of real property acquired in 1996 using MACRS is $22,000 while depreciation for AMT purposes is $15,000.
-R&E expenditures amounting to $60,000 are expensed.
The net adjustment is

Accepted Answer

A)  $7,000.
B)  $54,000.
C)  $61,000.
D)  $67,000.

Question 5

Kerry is single and has AGI of $25,000 in 2014. During the year he contributes $5,000 to his Roth IRA. What is the amount of qualified retirement savings contributions credit to which he is entitled?

Accepted Answer

A)  $200
B)  $400
C)  $800
D)  $1,000

Question 6

Runway Corporation has $2 million of gross receipts in the preceding year. For purposes of the disabled access credit, what is the maximum number of full-time employees the corporation can have in the preceding year?

Accepted Answer

A)  10
B)  15
C)  20
D)  30

Question 7

Which one of the following is a refundable credit?

Accepted Answer

A)  earned income credit
B)  child and dependent care credit
C)  lifetime learning credit
D)  credit for the elderly and disabled

Question 8

In 2014 Charlton and Cindy have alternative minimum taxable income of $130,000 and file a joint return. For purposes of computing the alternative minimum tax, their exemption is

Accepted Answer

A)  $0.
B)  $7,900.
C)  $52,800.
D)  $82,100.

Question 9

Medical expenses in excess of 10% of AGI are deductible when computing AMT.

Accepted Answer

A) True 
 B)False

Question 10

Refundable tax credits

Accepted Answer

A)  only offset a taxpayer's tax liability.
B)  may only be used if the taxpayer is receiving a refund.
C)  have all expired but may be reinstated with new tax legislation.
D)  allow the excess over the taxpayer's tax liability to be paid to the taxpayer.

Question 11

A taxpayer will be ineligible for the earned income credit if he or she has disqualified investment income of more than $3,350 in 2014. Disqualified income includes all the following except

Accepted Answer

A)  net capital gains.
B)  tax-exempt interest.
C)  net rental income.
D)  self-employment income.

Question 12

Assume you plan to volunteer at a Volunteer Income Tax Assistance (VITA)program for low income taxpayers and wish to prepare so you can help your clients achieve the maximum tax savings. Briefly discuss tax credits with which you should become familiar.

Accepted Answer

The answer of Assume you plan to volunteer at a...

Question 13

Beth and Jay project the following taxes for the current year:
  How much in estimated tax payments (including withholding from wages and quarterly estimated payments)should the taxpayers pay this year in order to avoid underpayment penalties under the following assumptions regarding the preceding tax year?
a. Preceding tax year-AGI of $140,000 and total taxes of $36,000.
b. Preceding tax year-AGI of $155,000 and total taxes of $50,000.

Accepted Answer

The answer of Beth and Jay project the following taxes...

Question 14

The nonrefundable disabled access credit is available to eligible small businesses for expenditures incurred to make existing business facilities accessible to disabled individuals.

Accepted Answer

A) True 
 B)False

Question 15

In the fall of 2014, James went back to school to earn a master of accountancy degree. He incurred $7,000 of qualified educational expenses and his modified AGI for the year was $40,000. His Lifetime Learning Credit is

Accepted Answer

A)  $1,000.
B)  $1,400.
C)  $1,800.
D)  $2,500.

Question 16

In computing the alternative minimum taxable income, no deduction is allowed for

Accepted Answer

A)  alimony.
B)  moving expenses.
C)  personal exemptions.
D)  individual retirement account contributions.

Question 17

All of the following statements regarding self-employment income/tax are true except:

Accepted Answer

A)  The self-employment tax is imposed on net earnings from self-employment over $400.
B)  Self-employment tax is computed separately for married individuals filing joint returns.
C)  Independent contractors are subject to self-employment tax on the amount of net earnings from the self-employment activity.
D)  Employees who have a business in addition to their regular employment are not subject to the self-employment tax since FICA is withheld on their wages.

Question 18

An individual with AGI equal to or less than $150,000 in the prior year may generally avoid penalties for underpayment of estimated tax in each of the following cases with the exception of

Accepted Answer

A)  estimated tax is less than $1,500.
B)  90% of the tax due for the current year is paid.
C)  90% of the tax due for the current year is paid when computed on an annualized basis.
D)  100% of the actual tax liability for the prior year is paid.

Question 19

Ava has net earnings from self-employment of $125,000. She also earned salary of $170,000 from a job held earlier in the year. How much Additional Medicare Tax will be owed on the self-employment income?

Accepted Answer

A)  $0
B)  $769
C)  $855
D)  $3,625

Question 20

Marvin and Pamela are married, file a joint return, and have two children, ages 9 and 11. Their combined AGI is $65,000. Marvin's earned income is $40,000; Pamela's is $25,000. They incur $6,500 of child-care expenses to enable them to be employed during the current year. Their child and dependent care credit is

Accepted Answer

A)  $1,200.
B)  $1,300.
C)  $1,800.
D)  $6,000.

Exam 14: Special Tax Computation Methods, Tax Credits, and Payment of Tax

Hawaii, Inc., began a child care facility for its employees during the year. The corporation incurred the following expenses: What is the amount of Hawaii's credit for employer-provided child care?