13 Jan It provides tax equity

Question 1. Question :

(TCO 4) Several years ago, Floyd purchased a structure for $150,000 that was originally placed in service in 1929. In the current year, he incurred qualifying rehabilitation expenditures of $200,000. The amount of the tax credit for rehabilitation expenditures and the amount by which the building’s basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts.

‘’

$20,000 credit, $180,000 basis

$20,000 credit, $200,000 basis

$20,000 credit, $350,000 basis

$40,000 credit, $160,000 basis

None of the above

Question 2. Question :

(TCO 4) 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 _____.

$1,125

$750

$450

$375

None of the above

Question 3. Question :

(TCO 4) Harry and Wilma are married and file a joint income tax return. On their tax return, they report $44,000 of adjusted gross income ($20,000 salary earned by Harry and $24,000 salary earned by Wilma) and claim two exemptions for their dependent children. During the year, they pay the following amounts to care for their 4-year-old son and 6-year-old daughter while they work.

ABC Day Care Center: $3,200

Blue Ridge Housekeeping Services: $2,000

Mrs. Mason (Harry’s mother): $1,000

Harry and Wilma may claim a credit for child and dependent care expenses of _____.

$840

$1,040

$1,200

$1,240

None of the above

Question 4. Question :

(TCO 4) In determining the number of withholding allowances on an employee’s Form W-4, the following is false.

Withholding allowances may be claimed for the taxpayer’s spouse and dependents.

Special withholding allowances may be claimed in certain situations.

An additional allowance is available if the taxpayer expects to claim a credit for child and dependent care expenses.

The number of withholding allowances must agree with the number of personal and dependency exemptions claimed on the taxpayer’s income tax return.

None of the above

Question 5. Question :

(TCO 4) In describing FICA taxes, which (if any) of the following statements is incorrect?

The base amounts for 20X1 probably will increase from the 20X0 amounts.

The base amounts for the Social Security and Medicare portions are the same.

If both spouses work, excess FICA taxes need not result.

Excess FICA taxes can be claimed as an income tax credit.

None of the above

Question 6. Question :

(TCO 5) Prior to the effect of the tax credits, Justin’s regular income tax liability is $200,000, and his tentative AMT is $195,000. Justin has the following credits.

Child tax credit: $800

Adoption credit: $5,000

Calculate Justin’s tax liability after credits.

$189,200

$194,200

$195,000

$200,000

None of the above

Question 7. Question :

(TCO 5) In 20X2, Fred has a $75,000 loss on a passive activity for regular income tax purposes. For AMT purposes, his loss is $65,000. The amount of the AMT adjustment resulting from the passive activity loss is _____.

$0

$10,000 positive adjustment

$65,000

None of the above

Question 8. Question :

(TCO 5) Konrad’s AGI is $190,000. He contributed $101,000 in cash to a public charity. What is Konrad’s charitable contribution deduction for AMT purposes?

$50,500

$57,000

$95,000

$101,000

None of the above

Question 9. Question :

(TCO 4) Nonrefundable tax credits include _____.

credits for the elderly

child tax credits

foreign tax credits

All of the above

None of the above

Question 10. Question :

(TCO 4) What is the rationale for the earned income credit?

It is intended to encourage economically disadvantaged individuals to seek work.

It is to help offset regressive taxes.

It provides tax equity to the poor.

All of the above

None of the above