Alan is considering making a $2,000 investment in a venture which will generate

Question

Alan is considering making a $2,000 investment in a venture which will generate immediate tax benefits for him. Alan who will not claim itemized deductions, has a tax liability before the investment of $10,000 and is in the 28% marginal tax bracket If the investment is of a type that produces a tax credit of 50% 0f the amount of the investment, by how much will Alan's tax liability decline if he makes the investment? Red Corporation hires two persons certified to be eligible employees for the general work opportunity tax credit each of whom is paid $8,000 during the year and each of whom provided more than 400 hours of service. Neither employee is a summer youth employee or qualifies as a long-term family assistance recipient. As a result of this event. Red Corporation may be able to claim a total work opportunity credit of:

Explanation / Answer

28.

ANS: C The tax credit reduces Alan’s tax liability by ($2,000 X 50%) = $1000

29.

ANS: B $6,000 × 40% × 2= $4,800

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