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Exam 13: The Alternative Minimum Tax and Tax Credits

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Question 1

Multiple Choice

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W, a widower, maintains a household for himself and two preschool children, for whom he is entitled to a dependency deduction.He has adjusted gross income of $25,000: $20,000 wages and $5,000 interest.W paid employment-related expenses of $4,000 for household services within his home, and paid $1,200 child care expenses at a nursery school.His child care credit for the year is

A) $1,560
B) $1,144
C) $1,200
D) $1,440
E) None of the above

F) B) and D)
G) A) and B)

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Question 2

Multiple Choice

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C, a single mother, has modified AGI of $42,000.In 2011, C's daughter, D, begins studying for her bachelor's degree as a full-time student at County University.On September 1, C pays $3,000 in qualified tuition for D's first semester.The amount of allowable American Opportunity Tax Credit scholarship credit allowed to C is

A) $2,500
B) $1,800
C) $1,350
D) $400
E) $0

F) B) and E)
G) A) and E)

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Question 3

Multiple Choice

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H and W are married with three children.At the close of 20x6, the children, X, Y, and Z, were ages 2, 6, and 8, respectively.H and W claim a dependency exemption for each of the children.This year H and W reported adjusted gross income of $115,500.The allowable child tax credit for H and W is

L earned $200,000 on the LPGA.She has deductible self-employment away-from-home expenses of $100,000 and current year's circulation expenditures of $90,000.L uses the standard deduction.Determine L's regular taxable income, and her alternative minimum taxable income.

When a taxpayer takes the rehabilitation investment tax credit on qualified property, he or she is required to reduce the basis for depreciation of the asset by the amount of the credit claimed.The amount of basis reduction may be recaptured as ordinary income on a later sale of the property.

The majority of the persons old enough to qualify for the credit for the elderly will not be able to claim the credit because they also receive social security benefits.

S receives incentive stock options (ISOs) as part of a compensation plan.The unrestricted option is for 100 shares at $100 per share.S exercises the option five years later when the FMV of the stock is $190 per share.S holds the stock for five more years and then sells it for $225 per share.Regarding the sale by S of the ISO stock, S will have a regular tax gain and AMT gain, respectively, of

Taxpayers are allowed to use the double declining balance method of depreciation for both the regular tax and the AMT computations.

J, a sole proprietor, had gross receipts of $500,000 last year and incurred $15,000 of eligible access expenditures this year.J's disabled access credit for this year is

B purchased an old textile factory building in Chicago that had been certified as a historic structure.The purchase price was $1 million, and he spent $3 million this year renovating it.B's tax credit [without regard to possible limitations imposed by § 38(c) ] and his basis in the building are

S receives incentive stock options (ISOs) as part of a compensation plan.The unrestricted option is for 100 shares at $100 per share.S exercises the option five years later when the FMV of the stock is $190 per share.S holds the stock for five more years and then sells it for $225 per share.In the year of exercise, S has reportable amounts for regular tax purposes and for AMT purposes, respectively, of

An eligible small business can elect to take a non-refundable tax credit equal to the amount of the eligible disabled access expenditures exceeding $250 but not exceeding $10,250 for any taxable year.

Circulation and research expenditures are AMT adjustments for both corporate and individual taxpayers.

H and W are married and have twins that are attending State University as freshmen this year.State University is on the semester system and charges $1,000 tuition per semester.H and W pay State University $2,000 this year.H and W have adjusted gross income of $170,000.The allowable American Opportunity Tax Credit for H and W is

T is married and files a joint return.The Ts have an AMTI of $350,000 and do not have a minimum tax foreign tax credit.The tentative minimum tax liability is

If the taxpayer elects the ADS method of depreciation for regular tax purposes, he will also be allowed to use ADS for AMT purposes.

There is no difference between a tax preference item and an AMT adjustment.

BobCo incurred $60,000 of qualifying research and experimentation expenses in 20x5.It had gross receipts of $420,000.Prior years' research expenses and gross receipts were $\begin{array} { l l l } \text { Research}& \text {Expenses } & \text { Gross Receipts } \\1986 & \$ 33,000&\$ 370,000 \\1987 & 25,000&250,000 \\1988 & 32,000&380,000 \\2000 & 33,000&410,000 \\2001 & 30,000&410,000 \\2002 & 25,000&400,000 \\2003 & 32,000&380,000 \\2004 & 30,000&410,000\end{array}$ BobCo's tax liability before credits was $25,000.Its research credit for 2005 is:

Which one of the following statements concerning the work opportunity tax credit is not true?

R bought new solar panels to be used to heat water for a production process on May 4, 2011 for $100,000 (the qualified investment is $100,000) .Assume that she sold the solar panels on May 31, 2012 for $90,000.She claimed and used the maximum energy investment credit in 2011, did not take any §179 expense, and used the MACRS tables to calculate the depreciation deduction.What was the amount of energy investment credit that was taken in 2011?