LO.10 Ann and Bill were on the list of a local adoption agency for several years seeking to adopt a child. Finally, in 2009, good news comes their way and an adoption seems imminent. They pay qualified adoption expenses of $4,000 in 2009 and $11,000 in 2010.

Assume the adoption becomes final in 2010. Ann and Bill always file a joint income tax return.

a. Determine the amount of the adoption expenses credit available to Ann and Bill assuming their combined annual income is $100,000. In what year(s) will they benefit from the credit?

b. Assuming Ann and Bill’s modified AGI in 2009 and 2010 is $200,000, calculate the amount of the adoption expenses credit.