CHAPTER 12 TAX CREDITS AND PAYMENTS

1. The tax benefit
received from a tax credit is never affected by the tax rate of the taxpayer.
a. True
b. False

2. The tax benefits
resulting from tax credits and tax deductions are affected by the tax rate
bracket of the taxpayer.
a. True
b. 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.
a. True
b. False

4. The credit for child
and dependent care expenses is an example of a refundable credit.
a. True
b. False

5. Any unused general
business credit must be carried back 3 years and then forward for 20 years.
a. True
b. False

6. A LIFO method is
applied to general business credit carryovers, carrybacks, and utilization of
credits earned during a particular year.
a. True
b. False

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.
a. True
b. False

8. Qualified
rehabilitation expenditures include the cost of acquiring the building, but not
the cost of acquiring the land.
a. True
b. False

9. The tax credit for
rehabilitation expenditures for certified historic structures differs from that
for qualifying structures that are not certified historic structures.
a. True
b. False

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.
a. True
b. False

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.
a. True
b. 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.
a. True
b. False

13.Employers are
encouraged by the work opportunity tax credit to hire individuals who have been
long-term recipients of family assistance welfare benefits.
a. True
b. False

14.The work opportunity
tax credit is available only for wages paid to qualifying individuals during
their first year of employment.
a. True
b. False

15.An employer’s tax
deduction for wages is affected by the work opportunity tax credit.
a. True
b. False

16.The incremental
research activities credit is 20% of the qualified research expenses that
exceed the base amount.
a. True
b. False

17.All taxpayers are
eligible to take the basic research credit.
a. True
b. 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.
a. True
b. False