True/False Questions: Ch. 13: ACC 4301

1. To be eligible for the earned income credit, an individual must maintain a household that is the principal abode of a qualifying child.

2. Unused foreign tax credits are carried back 3 years and forward 5 years.

3. In order to qualify for the adoption expense credit, a child must be under 18-years-old at the time of the adoption or physically or mentally incapable of self-care.

4. The disabled access credit is available to all small businesses.

5. The applicable percentage for the credit for certain retirement plan contributions for a married filing jointly taxpayer with AGI of $47,500 is 10%.

6. The tax credit for the elderly is 20 percent of the base amount, reduced by Social Security, Railroad Retirement, and certain excluded pension benefits, and reduced by one-half of the taxpayers AGI in excess of a threshold amount.

7. S corporations and personal service corporations are allowed the basic research credit.

8. The basic research credit is 25 percent for basic research payments over a base amount.

9. If an employee has no regular payroll period, then he or she is considered to be paid on a daily basis.

10. Individuals with net earnings from self-employment of $200 or more are subject to the self-employment tax.

11. A transfer of property to a qualified basic research organization does not qualify for the 20 percent basic research credit.

12. A food stamp recipient is one of the types of individuals targeted by the work opportunity tax credit.

13. The earned income credit is a form of negative income tax and can be refunded even if no tax is due.

14. The maximum amount of general business credit that can be taken in one year is equal to the taxpayer's net income tax reduced by the greater of the tentative minimum tax or 25 percent of net regular tax liability over $25,000.

15. Amounts spent for the care of a taxpayer's spouse may qualify for the dependent care credit.

16. The American Opportunity credit and the lifetime learning credit are available only for students seeking undergraduate degrees.

17. The penalty for underpayment of estimated tax may be avoided by single individuals with AGI under $150,000 if they file timely quarterly payments (including amounts withheld) that are equal to or exceed the prior year's tax liability.

18. In 2015, a single taxpayer has three qualifying children and earned income of $12,000. This taxpayers earned income credit is $3,169.

19. Employers can wait until the end of their taxable year before filing the required form for payroll withholding, as they do not have to deposit the withholding until the end of the year.

20. The maximum dependent care expenses credit for three qualifying children is $1,800.

21. Earl has $20,000 of income from Country A, which imposes a 30 percent tax. His U.S. source taxable income is $57,250 and he files single with one exemption. Assume his U.S. income tax is $19,000. Earls maximum foreign tax credit (FTC) is calculated as [$20,000/($57,250 + exemption + $20,000)] x $19,000.

22. An employer spends $300,000 for a childcare facility for its employees and claims a $75,000 credit for employer-provided childcare (25% x $300,000). The tax basis in the childcare facility must be reduced to $225,000 ($300,000 - $75,000) because of the credit.

23. The self-employment tax is 70 percent deductible for income tax purposes.

24. The rehabilitation credit is intended to discourage businesses from moving out of the inner city and to preserve historic structures.

25. The rate for the low-income housing credit is set monthly by the IRS.

26. The maximum total credit for small employer pension plan startup costs is $1,500.

27. The adoption expenses credit in 2015 is available for qualifying expenses of up to $25,000.