increas
Dreign income taxes
from a financial perspective by
Iset the expenses he will incur while living overseas. If
8.
Issue ID
Hapone de este
Issue ID
major tangible assets such as his personal automobile. Identify the relevant tax issues.
Tim takes the assignment, he will likely rent his personal residence and sell several
Mark and Lisa are approaching an exciting time in their lives as their oldest
Austin's college education?
some of the tax issues Mark and Lisa should consider as they think about paying for
L0.5 Elaborate rules exist that require employers to prepay various types of Fed-
to comply with the requirements.
eral taxes. Summarize the major issues that an employer must resolve if it is
10. L0.5 Kathy, a sole proprietor, owns and operates a grocery store. Kathy's husband
the husband and daughter be subject to FICA? Explain.
and her 16-year-old daughter work in the business and are paid wages. Will
11. LO.6 Describe the exposure (i.e., wage base and tax rate) that a self-employed
individual has to the self-employment tax for 2017.
12. LO.7 Describe the two additional Medicare taxes that are assessed on high-income
taxpayers.
Computatic
13. LO.2 Carlson's general business credit for the current year is $84,000. His net
income tax is $190,000, tentative minimum tax is $175,000, and net regular
tax liability is $185,000. He has no other Federal income tax credits. Determine
Carlson's general business credit for the
year.
Arch
Soeda
Napire
PART 4 Special Tax Computation Methods, Payment Procedures, and Tax Credits
8
originally had been placed in service in 1935.
What is Emily's rehabilitation expenditures tax credit?
23
2.
14. LO.3 Emily spent $135,000 to rehabilitate a building (adjusted basis of $90.00)
What would be your answer if the building was a historic structure?
15. LO.3 During 2017, Lincoln Company hires seven individuals who are certified
be members of a qualifying targeted group. Each employee works in esssss
of 600 hours and is paid wages of $7,500 during the year. Determine the amount ,
b.
2-
25
Lincoln's work opportunity credit.
16. LO.3 Dora incurs the following research expenditures.
$60,000
In-house wages
In-house supplies
5,000
Payment to ABC, Inc., for research
80,000
Determine the amount of qualified research expenditures.
b.
research activities credit.
20.
a.
Assuming that the base amount is $50,000, determine Dora's incremental
27
17. LO.4 Samuel and Annamaria are married, file a joint return, and have three qualifi-
ing children. In 2017, they earn wages of $34,000 and no other income.
Determine the amount of their earned income credit for 2017,
18. LO.4 In 2017, Henri, a U.S. citizen and calendar year taxpayer, reports $30,000 of income
from France, which imposes a 10% income tax, and $50,000 from Italy, which
imposes a 40% tax. In addition, Henri reports taxable income of $69,750 from within the
United States.
Henri is married filing a joint return, and he claims three dependency exemp
tions. Henri's U.S. tax before the foreign tax credit is $28,915. Determine the amount
of Henri's foreign tax credit.
a.
19. LO.4 In late 2016, Randy and Rachel Erwin paid $7,000 in legal fees, adoption fees
and other expenses directly related to the adoption of an infant son, Jameson,
In 2017, the year in which the adoption becomes final, they pay an additional
$8,000. Their AGI in 2017 is $135,000.
Determine the amount of the Erwins' adoption tax credit in 2017,
b. Instead assume that the Erwins' 2017 AGI is $210,000. Determine the amount of
the Erwins' adoption tax credit in 2017.
20. LO.4 Santiago and Amy are married and file a joint tax return claiming their three
children, ages 12, 14, and 18, as dependents. Their Agi is $140,000. Deter
mine the amount of the couple's child tax credit.
Sergio's child and dependent care credit.
21. LO.4 Ivanna, who has three children under age 13, worked full-time while her
spouse, Sergio, was attending college for nine months during the year. Ivana
earned $28,000 and incurred $9,100 of child care expenses. Determine Ivanna and
Fecision Making 22. LO.4,8 Polly and her husband, Leo, file a joint return and expect to report AGI of
$75,000 in 2017. Polly's employer offers a child and dependent care reim
bursement plan that allows up to $5,000 of qualifying expenses to be reimbursed in
exchange for a $5,000 reduction in the employee's salary. Because Polly and Leo
have two minor children requiring child care that costs $5.800 each year, Polly is
wondering if she should sign up for the program instead of taking advantage of the
two alterna
credit for child and dependent care expenses.
Assuming that Polly and I en
28. LO.2 Adelyn has a tentative general business credit of $42,000 for the current
year. Adelyn's net regular tax liability before the general business credit is
general business credit for the year.
$107,000, and her tentative minimum tax is $88,000. Compute Adelyn's allowable
29. LO.2 Oak Corporation has the following general business credit carryovers.
2013
2014
2015
2016
$ 5,000
15,000
6,000
19,000
$45,000
Total carryovers
If the general business credit generated by activities during 2017 equals $36,000 and
the total credit allowed during the current year is $60,000 (based on tax liability), what
amounts of the current general business credit and carryovers are utilized against the
2017 income tax liability? What is the amount of unused credit carried forward to 2018?
30. LO.3, 8 In the current year, Paul Chaing (4522 Fargo Street, Geneva, IL 60134)
Decis
acquires a qualifying historic structure for $350,000 (excluding the cost of
Com
the land) and plans to substantially rehabilitate the structure. He is planning to
spend either $320,000 or $380,000 on rehabilitation expenditures.
Write a letter to Paul and a memo for the tax files explaining, for the two alterna-
tive expenditures, (1) the computation that determines the rehabilitation expendi-
tures tax credit available to Paul, (2) the impact of the credit on Paul's adjusted basis
in the property, and (3) the cash-flow differences as a result of the tax consequences
related to his expenditure choice.
31. LO.3 Green Corporation hires six individuals on January 4, 2017, all of whom qual-
ify for the work opportunity credit. Three of these individuals receive wages
of $8,500 during 2017, and each individual works more than 400 hours during the
year. The other three individuals work 300 hours and receive wages of $5,000 during
the year.
Expiration Date: 05/01/2018
-
Expiration Date: 05/01/2018 - 03%
Agency 27th Avenue, Commercial
Coverage Company
AGENT
ANNET
18401
MIAN
COMM American
PROPERTY Property
Insurance
Company
КММ Wilshire
Insurance
Compar
Arch
Policy
Soe
AL
A AUTO
Special Tax Computation Methods, Payment Procedures, and Tax Credits
a.
Calculate the amount of Green's work opportunity credit for 2017.
b. If Green pays total wages of $140,000 to its employees during the year, how
much of this amount is deductible in 2017 assuming that the work opportunity
credit is taken?
Making 32. LO.3, 8 Tom, a calendar year taxpayer, informs you that during the year, he incurs
expenditures of $40,000 that qualify for the incremental research activities
credit. In addition, it is determined that his base amount for the year is $32,800.
a.
ons
Determine Tom's incremental research activities credit for the year.
b. Tom is in the 25% tax bracket. Determine which approach to the
e research
expenditures and the research activities credit (other than capitalization and
subsequent amortization) would provide the greater tax benefit to Tom.
33. LO.3 Ahmed Zinna (16 Southside Drive, Charlotte, NC 28204), one of your clients,
owns two retail establishments in downtown Charlotte and has come to you
seeking advice concerning the tax consequences of complying with the Americans
with Disabilities Act. He understands that he needs to install various features at his
stores (e.g., ramps, doorways, and restrooms that are handicap-accessible) to make
them more accessible to disabled individuals. He asks whether any tax credits will
be available to help offset the cost of the necessary changes. He estimates the cost
of the planned changes to his facilities as follows.
Location
Projected Cost
Calvin Street
Stowe Avenue
$22,000
8,500
He reminds you that the Calvin Street store was constructed in 2004, while the
Stowe Avenue store is in a building that was constructed in 1947. Ahmed operates
location. Write a letter to Ahmed in which you summarize your conclusions con-
cerning the tax consequences of his proposed capital imnou
a.
Thor
4. LO.4 Which of the following ind
for 2017?
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