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Exam 13: Tax Credits and Payment Procedures

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Question 41

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

A) The lifetime learning credit is available for qualifying tuition and related expenses incurred by students pursuing only graduate degrees.
B) The American Opportunity credit permits a maximum credit of 20% of qualified expenses up to $10,000 per year.
C) The American Opportunity credit is calculated per taxpayer, while the lifetime learning credit is available per eligible student.
D) Continuing education expenses do not qualify for either education credit.
E) None of the above statements is true.

F) C) and D)
G) All of the above

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Question 42

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Nonrefundable credits are those that reduce the taxpayer's tax liability but are not paid when the amount of the credit or credits) exceeds the taxpayer's tax liability.

A) True
B) False

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Question 43

Multiple Choice

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Which, if any, of the following correctly describes the earned income credit?

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 2018, and Arethia is beginning her senior year at Northeast University during Fall 2018 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, while Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2018. 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 2018 is:

Realizing that providing for a comfortable retirement is up to them, Jim and Julie commit to making regular contributions to their IRAs, beginning this year. Consequently, they each make a $2,000 contribution to their traditional IRA. If their AGI is $35,000 on their joint return, what is the amount of their credit for certain retirement plan contributions?

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

The disabled access credit is computed at the rate of 50% of all access expenditures incurred by the taxpayer during the year.

For purposes of computing the credit for child and dependent care expenses, the qualifying employment-related expenses are limited to an individual's actual or deemed earned income.

Which of the following statements concerning the credit for child and dependent care expenses is not correct?

Which of the following statements regarding the adoption expenses credit is not true?

A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is under age 17.

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

In March 2018, Gray Corporation hired two individuals, both of whom were certified as long-term recipients of family assistance benefits. Each employee was paid $11,000 during 2018. Gray Corporation's work opportunity tax credit amounts for 2018 is:

All taxpayers are eligible to take the basic research credit.

Refundable tax credits include the:

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

Rick spends $750,000 to build a qualified low-income housing project, which is placed in service on January 1, 2018. He financed the project using his personal funds. What is the amount of the low-income housing credit that Rick may claim in 2018 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?

A small employer incurs $1,500 for consulting fees related to establishing a qualified retirement plan for its 75 employees. As a result, the employer may claim the credit for small employer pension plan startup costs for $750.

The maximum child tax credit under current law is $1,500 per qualifying child.

Amber is in the process this year of renovating the office building 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?