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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 61

Multiple Choice

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Which of the following statements regarding the earned income credit is true?

A) It is a nonrefundable credit
B) It is possible that a taxpayer with more earned income may receive more credit than a taxpayer with less earned income
C) A 70-year-old taxpayer with no dependents can qualify for the credit in certain circumstances
D) A taxpayer whose only source of income is interest from corporate bonds is eligible for the credit

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

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Question 62

Multiple Choice

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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) B) and C)
F) All of the above

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Question 63

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Tax rate schedules are provided for use by (relatively) higher income taxpayers while the tax tables are provided for use by (relatively) lower income taxpayers.

During all of 2016, Mr. and Mrs. Clay lived with their four children (all are under the age of 17). They provided over one-half of the support for each child. Mr. and Mrs. Clay file jointly for 2016. Neither is blind, and both are under age 65. They reported the following tax-related information for the year: A.What is the Clays' taxes payable or (refund due)? (ignore the alternative minimum tax) B.What is the Clays' tentative minimum tax and alternative minimum tax?

During 2016, Jasmine (age 12) received $2,400 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. Assuming her parents' marginal tax rate is 28%, what is Jasmine's gross tax liability?

The AMT exemption amount is phased-out for high income taxpayers.

When applying credits against a taxpayer's gross tax liability, nonrefundable personal credits are applied first, then business credits, and finally refundable personal credits.

In certain circumstances a child with very little income may have at least a portion of their income taxed at the parents' marginal tax rate.

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 $123,000 for 2016?

Quantitatively, what is the relationship between the AGI phase-out thresholds for the child tax credit?

Which of the following statements regarding the child and dependent care credit is true?

Regular taxable income is the starting point for determining the alternative minimum tax.

In 2016, Maia (who files as a head of household) reported regular taxable income of $115,000. She itemized her deductions, deducting $8,000 in charitable contributions and $3,000 in state income taxes. She claimed exemptions for herself and her son, Hermes, ($4,000 each) . What is Maia's alternative minimum taxable income?

If both spouses of a married couple earn roughly equivalent wages, the couple is likely to pay a marriage penalty due to the nature of the tax rate schedules.

Demeter is a single taxpayer. Her AGI in 2016 is $81,200. Demeter may claim a child tax credit for her daughter Persephone. What amount of child tax credit is Demeter entitled to claim after any applicable phase-out?

Which of the following statements regarding the AMT exemption amounts is not true?

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

The Olympians have three children. The kiddie tax applies to unearned income received by which of the following children?

Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.

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