Prior to the effect of tax credits, Eunice's regular income tax liability is $325,000 and her tentative minimum tax is $312,000 . Eunice has general business credits available of $20,000 . Calculate Eunice's tax liability after tax credits
a. $0
b. $305,000
c. $312,000
d. $325,000
c
RATIONALE: Eunice's regular income tax liability after tax credits is $305,000 ($325,000 – $20,000). Her tentative minimum tax is $312,000, since the general business credit is not permitted in calculating tentative minimum tax. Because a taxpayer may claim the general business credit only to the extent his or her regular income tax liability exceeds the tentative minimum tax (TMT), Eunice's tax liability is $312,000 rather than $305,000.
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