Question

Carlson's general business credit (before limitations) for the current year is $148,950. His net income tax is $327,690, tentative minimum tax is $294,921, and net regular tax liability is $311,306. He reports no other Federal income tax credits for the year. Compute Carlson's general business credit allowed for the year, and any amounts that can be carried back and forward.

If required, round your computations to the nearest dollar.
Carlson's general business credit allowed for the year is____ and his unused general business credit is $ ____

Answer 1

Carlson's general business credit allowed for the year is $311,306 and he has no unused general business credit.

Step-by-step explanation:

To compute Carlson's general business credit allowed for the year, we need to compare his net regular tax liability and his tentative minimum tax. If his net regular tax liability is less than his tentative minimum tax, he can claim the difference between the two as his general business credit allowed for the year. If his net regular tax liability is greater than his tentative minimum tax, he can only claim his net regular tax liability as his general business credit allowed for the year.

In this case, Carlson's net regular tax liability ($311,306) is less than his tentative minimum tax ($294,921). Therefore, his general business credit allowed for the year is $311,306.

As for any amounts that can be carried back and forward, if Carlson's general business credit is limited because of his net income tax, he can carry back the unused credit for one year and carry forward the unused credit for 20 years.

In this case, since Carlson's general business credit allowed for the year ($311,306) is not limited by his net income tax, there are no amounts that can be carried back or forward.