Question 1

The foreign tax credit is equal to the smaller of foreign taxes paid or accrued in the tax year or the portion of the U.S.income tax liability attributable to the income earned in all foreign countries.

Accepted Answer

A) True 
 B)False

Question 2

The earned income credit is refundable only if a tax has been withheld.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Nonrefundable credits may offset tax liability but may not result in additional payments to the taxpayer.

Accepted Answer

A) True 
 B)False

Question 5

The earned income credit is available only to taxpayers with qualifying children.

Accepted Answer

A) True 
 B)False

Question 6

In the fall of 2013,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) $2,000.

Question 7

Lara started a self-employed consulting business in the last part of the year and earned $60,000 of net self- employment income.She had been employed as manager in a consulting firm prior to starting her own business and had earned $175,000.
(a)What is Lara's Additional Medicare Tax for 2013,if any?
(b)What is Lara's deduction for AGI for the Additional Medicare Tax?

Accepted Answer

The answer of Lara started a self-employed consulting business in...

Question 8

Which of the following expenditures will qualify as a research expenditure for purposes of the research credit?

Accepted Answer

A) An ice cream producer develops a new type of packaging that will keep ice cream frozen while driving home from the grocery store. 
B) An ice cream producer develops a new design on the package that will be more pleasing to the culture of a new market it is entering. 
C) An ice cream producer develops a new marketing campaign to introduce its brand to a new region of the country it is entering. 
D) All of the above qualify as research expenditures for the research credit.

Question 9

Reva and Josh Lewis had alternative minimum taxable income of $350,000 in 2013 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is

Accepted Answer

A) $31,775. 
B) $51,900. 
C) $49,025. 
D) $80,800.

Question 10

Max and Alexandra are married and incur $5,500 of qualifying expenses to care for their two children,ages 2 and 5.Max's earned income is $35,000 and Alexandra's earnings from a part-time job are $5,000.What is the amount of the qualifying expenses for purposes of computing the child and dependent care credit?

Accepted Answer

A) $3,000 
B) $5,000 
C) $5,500 
D) $6,000

Question 11

The child and dependent care credit provides relief for working taxpayers who pay for care for younger children or an incapacitated dependent or spouse.

Accepted Answer

A) True 
 B)False

Question 12

Sonya started a self-employed consulting business in the last part of the year and earned $40,000.She had been employed as manager in a consulting firm prior to starting her own business and had earned $125,000.
(a)What is Sonya's self employment tax for 2013?
(b)What is Sonya's deduction for AGI for the SE tax?

Accepted Answer

The answer of Sonya started a self-employed consulting business in...

Question 13

When a husband and wife file a joint return and both have self-employment income,the self-employment tax must be computed separately.

Accepted Answer

A) True 
 B)False

Question 14

All of the following are allowable deductions under the alternative minimum tax except

Accepted Answer

A) charitable contributions. 
B) gambling losses. 
C) qualified housing interest. 
D) personal property taxes.

Question 15

Nonrefundable 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) can be carried back two years and carried forward 15 years if they exceed tax liability in the current year. 
D) allow the excess over the taxpayer's tax liability to be paid to the taxpayer.

Question 16

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 answer of Hawaii,Inc.,began a child care facility for its...

Question 17

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 18

During the year,Jim incurs $50,000 of rehabilitation expenditures in connection with a certified historic structure used in his business.The adjusted basis of the structure was $40,000 at the time the rehabilitation began.
a.What is the amount,if any,of his rehabilitation credit for the year?
b.What is the depreciable basis of the rehabilitation expenditures?

Accepted Answer

The answer of During the year,Jim incurs $50,000 of rehabilitation...

Question 19

The present AMT applies to individuals,corporations,estates,and trusts.

Accepted Answer

A) True 
 B)False

Question 20

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.

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

The foreign tax credit is equal to the smaller of foreign taxes paid or accrued in the tax year or the portion of the U.S.income tax liability attributable to the income earned in all foreign countries.

The earned income credit is refundable only if a tax has been withheld.

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

Nonrefundable credits may offset tax liability but may not result in additional payments to the taxpayer.

The earned income credit is available only to taxpayers with qualifying children.

In the fall of 2013,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

Which of the following expenditures will qualify as a research expenditure for purposes of the research credit?

Reva and Josh Lewis had alternative minimum taxable income of $350,000 in 2013 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is

The child and dependent care credit provides relief for working taxpayers who pay for care for younger children or an incapacitated dependent or spouse.

When a husband and wife file a joint return and both have self-employment income,the self-employment tax must be computed separately.

All of the following are allowable deductions under the alternative minimum tax except

Nonrefundable tax credits

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?

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

The present AMT applies to individuals,corporations,estates,and trusts.

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