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Exam 13: Tax Credits and Payment Procedures

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Question 41

Multiple Choice

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The ceiling amounts and percentages for 2012 for the two portions of the self-employment tax are: Social Security portion Medicare portion

A) $110,100; 13.3% Unlimited; 2.9%
B) $110,100; 12.4% Unlimited; 2.9%
C) $110,100; 10.4% Unlimited; 2.9%
D) $110,100; 10.4% Unlimited; 13.3%
E) None of the above.

F) A) and E)
G) D) and E)

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Question 42

Multiple Choice

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

A) The cost of enlarging any existing business building is a qualifying expenditure.
B) The cost of facilities related to the building (e.g., a parking lot) is a qualifying expenditure.
C) No recapture provisions apply.
D) No credit is allowed for the rehabilitation of personal use property.
E) None of the above.

F) C) and D)
G) B) and C)

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Question 43

True/False

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The credit for child and dependent care expenses is an example of a refundable credit.

Ken is married to a nonemployed spouse and has three children.He is employed by Skyview,Inc.,and is paid a monthly salary of $5,150.Using these facts,determine the amount to be withheld by Skyview,Inc.,for Federal income tax purposes under the wage-bracket tables and under the percentage method for 2012.

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?

Child care payments to a relative are not eligible for the credit for child and dependent care expenses if the relative is a child (under age 19)of the taxpayer.

The education tax credits (i.e.,the American Opportunity credit and the lifetime learning credit)are available to help defray the cost of higher education regardless of the income level of the taxpayer.

The incremental research activities credit is 20% of the qualified research expenses that exceed the base amount.

During 2012,Barry (who is single and has no children) earned a salary of $13,000.He is age 30.His earned income credit for the year is:

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

Sam and Betty are married,have four dependent children,and both are employed.For withholding purposes,they may allocate their total allowances between themselves as they see fit.

Green Company,in the renovation of its building,incurs $9,000 of expenditures that qualify for the disabled access credit.The disabled access credit is:

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?

If a taxpayer chooses to claim a foreign tax credit,part of the foreign income taxes paid can also be claimed as a deduction.

Pat generated self-employment income in 2012 of $76,000.The self-employment tax is:

A small employer incurs $1,600 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 $800.

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

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

Rex and Dena are married and have two children,Michelle (age 7) and Nancy (age 5) .During 2012,Rex earned a salary of $24,000,received interest income of $300,and filed a joint income tax return.Dena had $0 gross income.Their earned income credit for the year is:

An individual generally may claim a credit for adoption expenses in the year in which the expenses are paid.