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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 concerning tax credits is true?

A) The tax benefit a taxpayer receives from a credit depends on the taxpayer's marginal tax rate.
B) Refundable tax credits are limited to a taxpayer's gross tax liability.
C) Tax credits are generally more beneficial than tax deductions.
D) None of these is a true statement.

E) B) and C)
F) C) and D)

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Question 32

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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) B) and D)
F) B) and C)

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Question 33

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All else equal, a reduction in regular income tax rates would require more taxpayers to pay the alternative minimum tax.

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

Which of the following is not true of the American opportunity credit?

Assume Georgianne underpaid her estimated tax liability by $150 in the first quarter, $500 in the second quarter, $400 in the third quarter, and $200 in the fourth quarter. Calculate her underpayment penalty for the year, assuming the federal short-term interest rate is five percent.

The amount of expenditures eligible for the child and dependent care credit is the least of three amounts. Which of the following is not one of those amounts?

Employees are not allowed to deduct FICA taxes they pay.

Demeter is a single taxpayer. Her AGI in 2014 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?

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.

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

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separate returns.

Tamra and Jacob are married and they file a joint tax return. Tamra received nearly five times the salary that Jacob received. Which of the following statements is true?

Hera wants to reduce her income tax liability by shifting some of her income to her 10-year-old daughter (a dependent), Athena. Last year, Hera gifted corporate bonds to Athena. This year, Athena received $1,500 in interest income from the bonds. What amount of tax will Athena pay on the interest income?

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

The wage base for which of the following taxes is capped?

Which of the following could explain why large number of taxpayers are subject to (or could become subject to) AMT?

For alternative minimum tax purposes, taxpayers are allowed to deduct state income taxes but are not allowed to deduct charitable contributions.

Jamie is single. In 2014, 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) ?

Carolyn has an AGI of $38,000 (all from earned income) , two qualifying children, and is filing as a head of household. What amount of earned income credit is she entitled to?