Chapter 13

Topics: Taxation in the United States, Income tax, Taxation Pages: 38 (7027 words) Published: June 15, 2014
CHAPTER 13--TAX CREDITS AND PAYMENT PROCEDURES Key
 
1. The tax benefit received from a tax credit is affected by the tax rate of the taxpayer.  FALSE
 
2. The tax benefits resulting from tax credits and tax deductions are never affected by the tax rate bracket of the taxpayer.  FALSE
 
3. Nonrefundable credits are those that reduce the taxpayer’s tax liability but are not paid when the amount of the credit (or credits) exceeds the taxpayer’s tax liability.  TRUE
 
4. The credit for child and dependent care expenses is an example of a refundable credit.  FALSE
 
5. Any unused general business credit must be carried back 1 year and then forward for 20 years.  TRUE
 
6. A FIFO method is applied to general business credit carryovers, carrybacks, and utilization of credits earned during a particular year.  TRUE
 
7. The purpose of the tax credit for rehabilitation expenditures is to encourage the relocation of businesses from older, economically distressed areas (i.e., inner city) to newer locations.  FALSE

 
8. Qualified rehabilitation expenditures include the cost of acquiring the building, but not the cost of acquiring the land.  FALSE
 
9. The tax credit for rehabilitation expenditures for certified historic structures differs from that for qualifying structures that are not certified historic structures.  TRUE
 
10. Some (or all) of the tax credit for rehabilitation expenditures will have to be recaptured if the rehabilitated property is disposed of prematurely or if it ceases to be qualifying property.  TRUE

 
11. If a taxpayer is required to recapture any tax credit for rehabilitation expenditures, the recapture amount need not be added to the adjusted basis of the rehabilitation expenditures.  FALSE
 
12. The purpose of the work opportunity tax credit is to encourage employers to hire individuals from specified target groups traditionally subject to high rates of unemployment.  TRUE
 
13. Employers are encouraged by the work opportunity tax credit to hire individuals who have been long-term recipients of family assistance welfare benefits.  TRUE
 
14. The work opportunity tax credit is available only for wages paid to qualifying individuals during their first year of employment.  FALSE
 
15. An employer’s tax deduction for wages is not affected by the work opportunity tax credit.  FALSE
 
16. The incremental research activities credit is 20% of the qualified research expenses that exceed the base amount.  TRUE
 
17. All taxpayers are eligible to take the basic research credit.  FALSE
 
18. Qualified research and experimentation expenditures are not only eligible for the 20% tax credit, but also can be expensed in the year incurred.  TRUE
 
19. The low-income housing credit is available to low-income tenants who reside in qualifying low-income housing.  FALSE
 
20. A taxpayer who qualifies for the low-income housing credit claims the credit over a 15-year period.  FALSE
 
21. The disabled access credit was enacted to encourage small businesses to make their businesses more accessible to disabled individuals.  TRUE
 
22. The disabled access credit is computed at the rate of 50% of all access expenditures incurred by the taxpayer during the year.  FALSE
 
23. If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp, the cost of the ramp qualifies for the disabled access credit.  FALSE

 
24. A small employer incurs $1,600 for consulting fees related to establishing a qualified retirement plan for its 75 employees. As a result, the employer may claim the credit for small employer pension plan startup costs for $800.  FALSE

 
25. BlueCo incurs $700,000 during the year to construct a facility that will be used exclusively for the care of its employees’ pre-school age children during normal working hours. The credit for employer-provided child care available to BlueCo this year is...
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