CHAPTER 12 TAX CREDITS AND PAYMENTS

1. In March 2014, 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 2014. Only one of the individuals continued to work for Gray Corporation in 2015, earning $9,000 during the year. No additional workers were hired in 2015. Gray Corporation’s work opportunity tax credit amounts for 2014 and 2015 are:

a. $4,000 in 2014, $4,000 in 2015.

b. $8,000 in 2014, $4,500 in 2015.

c. $8,000 in 2014, $5,000 in 2015.

d. $8,000 in 2014, $9,000 in 2015.

e. None of the above.

2. During the year, Green, Inc., incurs the following research expenditures:

In-house wages, supplies, computer time $60,000

Paid to Blue Foundation for research 30,000

Green’s qualifying research expenditures for the year are:

a. $60,000.

b. $75,000.

c. $79,500.

d. $90,000.

e. None of the above.

3. Which, if any, of the following correctlydescribes the research activities credit?

a. The research activities credit is the greater of the incremental research credit, the basic research credit, or the energy research credit.

b. If the research activities credit is claimed, no deduction is allowed for research and experimentation expenditures.

c. The credit is notavailable for research conducted outside the United States.

d. All corporations qualify for the basic research credit.

e. None of the above.

4. 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:

a. $8,750.

b. $4,500.

c. $4,375.

d. $4,250.

e. None of the above.

5. 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. $0.

b. $5,000.

c. $5,125.

d. $5,500.

e. None of the above.

6. Which, if any, of the following correctlydescribes the earned income credit?

a. Would be available regardless of the amount of the taxpayer’s adjusted gross income.

b. Not available to a surviving spouse.

c. A taxpayer must have a qualifying child to take advantage of the credit.

d. Is a refundable credit.

e. None of the above.

7. Rex and Dena are married and have two children, Michelle (age 7) and Nancy (age 5). During 2014, Rex earned a salary of $24,500, received interest income of $300, and filed a joint income tax return with Dena. Dena had $0 gross income. Their earned income credit for the year is:

a. $0.

b. $324.

c. $5,136.

d. $5,460.

e. None of the above.

8. Cheryl is single, has one child (age 6), and files as head of household during 2014. Her salary for the year is $19,500. She qualifies for an earned income credit of the following amount:

a. $0.

b. $267.

c. $3,038.

d. $3,305.

e. None of the above.

9. During 2014, 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:

a. $0.

b. $122.

c. $374.

d. $496.

e. None of the above.

10.George and Jill are husband and wife, ages 67 and 65 respectively. During the year, they receive Social Security benefits of $4,000 and have adjusted gross income of $11,000. Assuming they file a joint return, their tax credit for the elderly, before considering any possible limitation due to their tax liability, is:

a. $1,125.

b. $750.

c. $450.

d. $375.

e. None of the above.

11.During the year, Green Corporation (a U.S. corporation) has U.S.-source income of $750,000 and foreign income of $500,000. The foreign-source income generates foreign income taxes of $240,000. The U.S. income tax before the foreign tax credit is $425,000. Green Corporation’s foreign tax credit is:

a. $170,000.

b. $240,000.

c. $425,000.

d. $500,000.

e. None of the above.

12.During the year, Purple Corporation (a U.S. Corporation) has U.S.-source income of $1,800,000 and foreign income of $600,000. The foreign-source income generates foreign income taxes of $150,000. The U.S. income tax before the foreign tax credit is $816,000. Purple Corporation’s foreign tax credit is:

a. $112,500.

b. $150,000.

c. $204,000.

d. $816,000.

e. None of the above.

13.In 2013, Juan and Juanita incur $9,800 in legal and adoption fees directly related to the adoption of an infant son born in a nearby state. Over the next year, they incur another $4,500 of adoption expenses. The adoption becomes final in 2014. Which of the following choices properly reflects the amounts and years in which the adoption expenses credit is available.

2013	2014
a. $9,800	$ 4,500
b. None	$13,190
c. None	$14,300
d. $9,800	$ 3,390

e. None of the above.