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17 June, 22:09

Niles and Marsha adopted an infant boy (a U. S. citizen). They paid $17,500 in 2016 for adoption-related expenses. The adoption was finalized in early 2017. Marsha received $3,600 of employer-provided adoption benefits. For question a) assume that any adoption credit is not limited by modified AGI or by the amount of tax liability.

A. What amount of adoption credit, if any, can Niles and Marsha take in 2017? $9,970

B. Using the information in question a), assume that their modified AGI was $222,000 in 2017. What amount of adoption credit is permitted in 2017? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)

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  1. 17 June, 23:28
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    A) the adoption credit for 2017 was $13,570 per child. This credit applies only to adoption processes finalized during that year. This case applies since the adoption process was started in 2016 but ended in 2017.

    total adoption credit = $13,570 - $3,600 received in benefits from employer = $9,970

    B) the phase out range in 2017 was $203,540-$243,540. Since their income was $222,000, their adoption credit will phase out proportionally by = ($222,000 - $203,540) x ($13,570 / $40,000) = $18,460 x 0.33925 = $6,263

    So the adoption tax credit = $13,570 - $6,263 = $7,307
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