STUDY UNIT 7:CREDITS,AMT, AND LOSSES

Question 1

Disposes of all interest in the passive activity

Answer 1

suspended and current-year losses from passive activities become deductible in full

Question 2

Life Time Learning Credit

Answer 2

Phased out:
Single: 56K-66K
Joint: 112K-132K
Max. Credit:2K
is 20% of first 10K tuition paid.

Question 3

Earned Income Credit

Answer 3

Can refunded without tax liability.
QC under age 19
Married must file jointly.

Question 4

Child and dependent care credit

Answer 4

Nonrefundable.
Under age 13.
Max. 3K (up to 35% of exp; 6K for 2 or more).

Question 5

AMT

Answer 5

1. Computed as excess of the tentative tax over the regular tax.
2. Preference item: tax-exempt interest from private activity bond;state and local income taxes;Misc 2%;personal exemption;
3. AMT exemption: joint-84,500
   single-54,300
   MS-42,250
4. AMT credit can carry forward indefiniteness.

Question 6

Capital Loss- Off set ordinary income

Answer 6

3Km(1.5K MS)// 3:5

Question 7

NOL

Answer 7

Investment income is not NOL itme.

2;20

Question 8

Passive loss relating estate

Answer 8

Forward indefinitely until the disposed// 25K ordinary income// Carry forward only.//AGI over 100K 25K reduced by 50% of AGI Excess 100K.//Completely phase out 150K

Question 9

At-risk rules

Answer 9

Limted deduct losses from investment activates.

Question 10

American opportunity credit (under grad 4 year)

Answer 10

Phase out joint: completely 180K// 100% for first 2K/25% for 2nd 2K//*AGI- 80K o
160K/10K or 20 K

Question 11

Credit for the elderly

Answer 11

This answer is correct.
An individual who has attained age 65 is allowed a credit equal to 15% of the individual’s reduced base amount. For a single individual, the initial base amount is $5,000, reduced by any amounts received as Social Security benefits or otherwise excluded from gross income. The base amount is also reduced by one-half of the excess of AGI over $7,500 (for a single individual).
Initial base amount
$5,000
Less AGI limitation
[($12,550 – $7,500) × 50%]
(2,525)
Less Social Security benefits
(500)
Reduced base amount
$1,975
×    .15
Klein’s credit for the elderly
$   296
Since the taxpayer’s tax before credits is $60, only $60 of the credit can be claimed.