Chap9%20HW%20Solutions - 138 CCH Federal Taxation-Basic...

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138 CCH Federal Taxation—Basic Principles ¶9445 Tax Credits None of the nonrefundable credits reduce AMT liability for noncorporate taxpayers except the foreign tax credit. ¶9455 Carryover of Credit The alternative minimum tax paid in one year may be carried forward indefinitely as a credit against the regular tax liability. The credit may not be used, however, to offset any future minimum tax liability. ¶9475 Alternative Minimum Tax Planning Individuals subject to the alternative minimum tax generally benefit by accelerating income into an AMT year. Income recognized in an AMT year will generally be taxed at 26 or 28 percent rather than the higher regular tax rate. ANSWER TO KEYSTONE PROBLEM—CHAPTER 9 (¶9165.) The investment credit is part of the general business credit which is taken last in the nonrefundable credit category. The investment credit is made up of the energy investment credit, the rehabilitation investment credit, and the reforestation credit. An increase in this credit will not affect the other nonrefundable credits. An increase in the expenses for household and dependent care would increase that credit and could reduce the income tax enough to deny any benefit from other nonrefund- able credits that have no carryover provisions. ANSWERS TO QUESTIONS—CHAPTER 9 Topical List of Questions 1. Tax Credit v. Tax Deduction (¶9001) 2. Refundable v. Nonrefundable Credits (¶9001) 3. Household and Dependent Care Credit (¶9015) 4. Dependent Care Credit: Employment-Related Expenses (¶9015) 5. Dependent Care Credit Requirements (¶9015) 6. Dependent Care Credit Limits (¶9015) 7. Dependent Care Credit Requirements (¶9015) 8. Elderly Persons Credit (¶9025) 9. Elderly Persons Credit and Social Security Benefits (¶9025) 10. Child Tax Credit (¶9032) 11. Child Tax Credit (¶9032) 12. Child Tax Credit (¶9032) 13. Hope Scholarship Credit (¶9031) 14. Hope Scholarship Credit (¶9031) Chapter 9
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Instructor's Manual 139 15. Lifetime Learning Credit (¶9031) 16. Foreign Tax Credit (¶9035) 17. Foreign Tax Credit v. Itemizing (¶9035) 18. General Business Credit (¶9045) 19. Rehabilitation Investment Credit (¶9045) 20. Investment Credit (¶9045) 21. Investment Credit Basis (¶9045) 22. Disposal of Investment Credit Property (¶9045) 23. Recapture: Basis Adjustment (¶9045) 24. Research Credit (¶9045) 25. General Business Credit Ceiling Limitations (¶9045) 26. General Business Credit Carryover (¶9045) 27. Work Opportunity Credit (¶9045) 28. Nonrefundable Credits Carryovers (¶9001—¶9045) 29. Social Security Tax Refunds Credit (¶9115) 30. Earned Income Credit (¶9125) 31. Earned Income Credit (¶9125) 32. Estimated Tax Filing Requirements (¶9165) 33. Underpayment of Taxes Penalty (¶9165) 34. Alternative Minimum Tax Purpose (¶9401) 35. Alternative Minimum Tax Preference Items (¶9425) 36. Alternative Minimum Tax Preference Items (¶9425) 37. Alternative Minimum Tax Itemized Deductions (¶9415) 38. Alternative Minimum Tax Interest (¶9415) 39. Alternative Minimum Tax Credit (¶9445) Answers to Questions Tax Credit v. Tax Deduction 1. A tax credit is a direct reduction in the tax liability, while a deduction reduces taxable income before applying the tax rate. In the 28 percent bracket, a $2,000 deduction would result in a $560 tax savings; the credit would be only $400. In the 15 percent bracket, the deduction would be
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Chap9%20HW%20Solutions - 138 CCH Federal Taxation-Basic...

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