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Exam 7: Individual Income Tax Computation and Tax Credits

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Question 31

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Which of the following statements regarding credits is correct?

A) Business expenses are generally refundable credits.
B) Business credits that are generated in one year but are not utilized in that year expire.
C) Business credits that are generated in one year but are not utilized in that year may be carried forward to future years but not back to a prior year.
D) Business credits that are generated in one year but are not utilized in that year may be carried back to the previous year and then forward to future years.

E) None of the above
F) C) and D)

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Question 32

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Jamie is single.In 2018,she reported $100,000 of taxable income,including a long-term capital gain of $5,000.What is her gross tax liability,rounded to the nearest whole dollar amount? (Use the tax rate schedules)

A) $19,443
B) $18,290
C) $17,840
D) $15,000

E) None of the above
F) B) and C)

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Question 33

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The child tax credit is subject to phase-out based on the taxpayer's AGI.

During 2018,Jasmine (age 12) received $6,500 from a corporate bond.She also received $600 from a savings account established for her by her parents.Jasmine lives with her parents and she is their dependent.What is Jasmine's gross tax liability?

Jerusha is married and she files a separate tax return in 2018.She claimed the standard deduction for regular tax purposes ($12,000).She had no other adjustments.Her regular taxable income was $67,800.What is Jerusha's AMTI?

To qualify for the earned income credit,the taxpayer must have a qualified dependent.

Henry and Janice are married and file jointly.They have an AGI (and modified AGI)of $290,000,which includes $90,000 of salary,$170,000 of active business income,$10,000 of interest income,$15,000 of dividends,and $5,000 of long-term capital gains.What are Henry and Janice's net investment income tax liability this year,rounded to the nearest whole dollar amount?

Which of the following is not a taxpayer filing status for purposes of determining the appropriate tax rate schedule?

Which of the following statements regarding FICA taxes is true?

Business credits are generally refundable credits.

All capital gains are taxed at preferential rates.

IN THE TEXT -Trudy is Jocelyn's friend.Trudy looks after Jocelyn's four-year-old son during the day so Jocelyn can go to work.During the year,Jocelyn paid Trudy $4,000 to care for her son.What is the amount of Jocelyn's child and dependent care credit if her AGI for the year was $30,000? (Exhibit 8-9)

Julien and Sarah are married,file a joint return,and have two children,Kaya and Christopher.Kaya just finished her third year at college and Christopher just finished his first year of graduate school (fifth year of college).Tuition and books for the past year were $1,800 for Kaya and $5,000 for Christopher.How much can Julien and Sarah claim in educational credits if their joint AGI was $126,000 for 2018?

IN THE TEXT -Kaelyn's mother,Judy,looks after Kaelyn's four-year-old twins so Kaelyn can go to work (she drops off and picks up the twins from Judy's home every day) .Since Judy is a relative,Kaelyn made sure,for tax purposes,to pay her mother the going rate for child care ($6,300 for the year) .What is the amount of Kaelyn's child and dependent care credit if her AGI for the year was $36,000? (Exhibit 8-9)

Persephone has a regular tax liability of $12,475 and a tentative minimum tax of $11,500.Given just this information,what is her alternative minimum tax liability for the year?

Hester (age 17) is claimed as a dependent by his parents,Charlton and Abigail.In 2018,Hester received $10,000 of qualified dividends and he received $11,800 from a part time job.What is his taxable income for 2018?

The alternative minimum tax is the AMT base multiplied by the AMT rate.

Tax credits reduce a taxpayer's taxable income dollar for dollar.

The earned income credit is sometimes referred to as a negative income tax.

The kiddie tax does not apply to children over 24 years old at the end of the tax year.