Which of the Following Statements Concerning Tax Credits Is True

question 8

Multiple Choice

Which of the following statements concerning tax credits is true?

• A)The tax benefit a taxpayer receives from a credit depends on the taxpayer's marginal tax rate.
• B)Refundable tax credits are limited to a taxpayer's gross tax liability.
• C)Tax credits are generally more beneficial than tax deductions.
• D)None of these are true statements.

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Definitions:

Income Items

Various types of earnings, from employment, investments, or other sources, that must be reported on a tax return.

Investor

An individual or institution that allocates capital to investments with the expectation of receiving financial returns.

Materially Participate

Regular, continuous, and substantial involvement in business operations, determining if a tax loss is passive or nonpassive.

Passive Income

Earnings derived from a rental property, limited partnership, or other enterprises in which a person is not actively involved.