Flashcards in Business Tax Credits Deck (10)
Loading flashcards...
1
How is the proportion of US tax allocable to foreign source income computed?
US tax x (foreign taxable income / worldwide taxable income).
2
What is the credit limit of foreign tax credit?
Lower of the foreign tax paid or the proportion of US tax allocable to foreign source income.
3
What happens to excess credits?
Carry back 1 yr, forward 10 yrs.
4
Question:
Wordwide taxable income: 300,000.
US source taxable income: 180,000.
US income tax before foreign tax credit: 96,000.
Foreign source taxable income: 120,000.
Foreign income taxes paid on foreign source taxable income: 39,000.
What amount of foreign tax credit may be claimed?
Lower of:
*39,000
*96,000 x (120,000/300,000)=38,400.
Therefore, $38,400.
5
General business credit: what is the limit re: regular tax liability amount?
The business credit can't offset all of the reular tax if the liability exceeds $25,000.
6
General business credit: what happens to unused credit?
Carried back 1 yr, forward 20 yrs.
7
General business credit: what is eligible for research credit and how much? Criteria? What are things that are NOT eligible?
Incremental research expenditures are eligible for a 20% credit.
Research must be conducted within the US.
Not: commercial production, surveys, social science research.
8
General business credit: what is the formula for alternative simplified research credit?
Equal to 14% of the excess of qualified research expenses over 50% of the average research expenses for the last 3 yrs.
9
General business credit: what is WOTC? What is the credit based on? How is the credit computed? Maximum credit? Impact on deduction for wages?
*Work opportunity tax credit - by hiring people from certain category such as veterans.
*Calculated on the amount of wages paid per eligible employee during the first year of employment.
*Credit: 40% of qualified wages.
*Max: $2,400.
*Reduces the deduction for wages.
10
