Question

Elsie has a tentative general business credit of $65,000 for the current year. Her net regular tax liability before the general business credit is $145,000, and her tentative minimum tax is $101,000.

1. Complete the statements below that outline Elsie's limitation on the general business credit.

Elsie's general business credit is limited to her net income tax reduced by the greater  of her tentative minimum tax or 25 % of the net regular tax liability that exceeds $. _________

Therefore, Elsie's allowable general business credit for the year is $. ________

2. Olenka Corporation hires 13 individuals on March 12, 2019, all of whom qualify for the work opportunity credit. Nine of these individuals receive wages of $16,500 during 2019, and each individual works more than 400 hours during the year. The remaining four employees worked 100 hours and earned $2,100 during the year.

a. Calculate the amount of Olenka's work opportunity tax credit for 2019.
$ _____________

b. If Olenka pays total wages of $312,000 to its employees during the year, how much of this amount is deductible in 2019, assuming the work opportunity credit is taken?
$ _____________

Answer 1

1.

Elsie's general business credit is limited to his net income tax reduced by the greater of his tentative minimum tax or 25% of the net regular tax liability that exceeds $25,000.

Therefore, Elsie's allowable general business credit for the year is $40,000 ($65,000-$25,000)

2.

a	Work Opportunity Tax Credit
	9 Workers * $16,500 * 40%	$   59,400
	WOTC is 40% if employee works 400 hours or more or 25% if 120 Hours or more
b	Deductible Amount (312000-59400)	$ 252,600