Chapter 13 Questions

Question 1

Explain the purpose of the disabled access credit, and identify several examples of the type of structural changes to a building that qualify for the credit.

Question 2

Is the earned income credit a form of negative income tax? Why or why not?

Question 3

Individuals who receive substantial Social Security benefits are usually not eligible for the tax credit for the elderly or disabled because these benefits effectively eliminate the base upon which the credit is computed. Explain.

Question 4

Mark and Lisa are approaching an exciting time in their lives as their oldest son, Austin, graduates from high school and moves on to college. What are some of the tax issues Mark and Lisa should consider as they think about paying for Austin's college education?

Question 5

Polly and her husband, Leo, file a joint return and expect to report AGI of $75,000 in 2015. Polly's employer offers a child and dependent care reimbursement 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 credit for child and dependent care expenses.

Question 6

Blue Horizons, Inc., a U.S. corporation, is a manufacturing concern that sells most of its products in the United States. It also does some business in the European Union through various branches. During the current year, Blue Horizons has taxable income of $700,000, of which $500,000 is U.S. - sourced and $200,000 is foreign-sourced. Foreign income taxes paid amounted to $45,000. Blue Horizon's U.S. income tax liability is $238,000. What is its U. S. income tax liability net of the allowable foreign tax credit?