ACCT 3630 Taxation I Final Exam Review Q & A 2026 (Complete And Verified Study material) (21pages) LEARNEXAMS

1. A corporation has a choice between two tax credits: Credit A, which is refundable and worth 20% of the expenses incurred, and Credit B, which is non-refundable but allows for a 30?duction of the expenses. If the corporation incurred $100,000 in qualifying expenses, which credit option minimizes the corporation's tax liability and why? Answer: Credit B minimizes the tax liability because the 30?duction on the expenses would result in a $30,000 reduction in taxable income, which could result in a greater tax saving than the 20% refundable credit, depending on the corporation's tax rate. 2. An individual taxpayer has the option to either itemize deductions or take the standard deduction. Given that the taxpayer has $10,000 in itemizable deductions, which is below the standard deduction amount for the year, what should the taxpayer do to minimize tax liability, and what is the rationale behind this? Answer: The taxpayer should take the standard deduction because it will provide a greater reduction in taxable income than the total of the itemizable deductions, thus minimizing the tax liability. 3. A company is evaluating the tax implications of asset depreciation under two different methods: straight-line and declining balance. If the goal is to reduce taxable income as much as legally possible in the first year of the asset's life, which method should the company choose and why? Answer: The company should choose the declining balance method because it provides a higher depreciation expense in the first year, reducing taxable income more than the straight-line method. 4. A taxpayer is considering converting a traditional IRA to a Roth IRA. What are the immediate and long-term tax implications of this conversion, and under what circumstances might this be advantageous? Answer: The immediate implication is the payment of taxes on the converted amount, but the long-term benefit is tax-free growth and withdrawals. This might be advantageous if the taxpayer expects to be in a