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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 21

Multiple Choice

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If there is not enough gross tax liability to use the foreign tax credit, __________.

A) it expires unused
B) it is carried back 2 years or forward 20 years
C) it is carried back 3 years or forward 5 years
D) it is carried back 1 year or forward 10 years

E) C) and D)
F) A) and D)

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Question 22

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Which of the following is not true of the lifetime learning credit?

A) It is a nonrefundable credit.
B) The credit can be claimed by taxpayers who have graduated from college and are taking professional training courses to improve their job skills.
C) A taxpayer with multiple dependents can claim a credit for each dependent's qualifying expenses.
D) The credit is subject to phase out based on the taxpayer's AGI.

E) A) and D)
F) B) and D)

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Question 23

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Jack paid $5,000 in daycare expenses for his five-year-old daughter so he could work. His AGI for the year was $37,500 (all earned income). What is the amount of his child and dependent care credit?

Which of the following statements regarding the child tax credit is false?

Pyrrha, a 12-year-old dependent of Epimetheus and Pandora, received $2,200 of interest income in 2016. Her parents' marginal tax rate is 35%. What is Pyrrha's gross tax liability for the year?

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundable personal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

In 2016, Athena reported $38,650 of taxable income. Of this, $33,650 came from her work at the local library and the remaining $5,000 was from capital gains to be taxed at preferential rates. Compute her tax liability for 2016 as a single taxpayer.

Which of the following is not a barrier to income shifting among family members?

All capital gains are taxed at preferential rates.

Depending on the year, the original (unextended) due date for an individual's tax return may be after April 15.

Taxpayers are not required to file a tax return unless their gross income passes a certain threshold. This threshold is generally the ________.

Which of the following statements regarding credits is correct?

The alternative minimum tax base is typically ______ the regular income tax base.

Parents may claim a child tax credit for a dependent child who is 22 years of age at the end of the year if the child is a full-time student.

Costa is a single taxpayer. His regular tax liability was $38,000. For 2016, he reported $190,000 of alternative minimum taxable income. What is his alternative minimum tax?

Angelena files as a head of household. In 2016, she reported $51,000 of taxable income, including a $10,000 qualified dividend. What is her gross tax liability, rounded to the nearest whole dollar amount? (use the tax rate schedules)

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?

For married couples, the Social Security wage base limitation applies separately to each spouse.

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