[moogatwo]

I just finished taking my first practice exam using the Becker software, and I only missed 1 question! It relates to the education credits, and I cannot seem to figure it out.

Jermaine and Keesha are married, file a joint tax return, have AGI of $75,000, and have two children. Devona is beginning her freshman year at State University this fall, and Arethia is beginning her senior year at Northeast University this fall. Both Devona and Arethia are claimed as dependents on their parents’ tax return. Devona’s qualifying tuition expenses and fees total $3,600 for the fall semester, while Arethia’s qualifying tuition expenses and fees total $4,250.

Full payment is made for the tuition and related expenses for both children during the fall semester. The American opportunity and lifetime learning credits, respectively, available to Jermaine and Keesha for the year are (assume 2010 tax law):

According to Becker, the correct answer is 2400 (American Opportunity) and 850 (lifetime learning). I thought the American opportunity credit was available for an unlimited number of qualified students? Shouldn’t they both qualify for a total credit of 4900?

Reg: 7/29/11 (89)
AUD: 8/30/11 (95)
FAR: 10/31/11(88)
BEC: 1/10/12 (86)

[Whenindoubt]

That's crazy…I missed the same question as well when took the practice exam this morning. I struggled with it too. I thought the J&A would qualify for two AOC credits up to $2,500/each (100% 1st 2K, 25% 2nd 2K) since it's a “per student” basis and both students were still in their first 4 years of school. I don't get it.

Hopefully someone else will respond and clear it up.

BEC: 75 11/8/10
AUD: 89 2/22/11
FAR: 78 5/17/11
REG: 72, 83 10/17/11
DONE!!!!

[moogatwo]

The only thing I can think of (besides Becker being incorrect) is the AO credit only applies to your first 4k worth of undergrad expenses? If that's the case Becker's answer makes sense, because Denova is beginning her freshman year of college while Arethia is working on finishing her senior year? She would have already incurred 4k work of expenses in her 3 previous years of school. Ugh! I want this exam to be over!!!!

Reg: 7/29/11 (89)
AUD: 8/30/11 (95)
FAR: 10/31/11(88)
BEC: 1/10/12 (86)

[NCEKK]

I was confused by that question at first as well. But, I think you are just supposed to use the information given and not try to figure out what is most beneficial. It asks for “the American opportunity and lifetime learning credits, respectively, available to Jermaine and Keesha for the year are (assume 2010 tax law).” So, your answer should be what the amounts are for the students if those specific credits were used. AOC for Jermaine and LLC for Keesha.

BEC 84
REG 90
AUD 87
FAR 73...try again in November

[IwannaBaCPA]

Ok, so I am not studying for REG yet, but when I read this question I immediately see the line “Devona is beginning her freshman year at State University this fall” and that says to me she has yet to start, so she has yet to have incurred any expenses, so she is not eligible for any credits for THIS year's tax return…

Anyone else think that explains the confusion? I could be totally off…

BEC: 79 - April 2011
FAR: 78 - May 2011
AUD: 81 - May 2012
REG: 79 - October 2012
Ethics: Passed - March 2013
I am finally DONE!

[petow]

I just looked at the question and there is only one answer that correctly uses both of the credits. They would be able to use the AOC for both of them but that is not an answer choice. The answer can be quickly narrowed down by calculating the LLC that would be available to them and seeing that there is only one that uses it correctly. Like NCEKK said, it is not the most beneficial answer but the one that works.

FAR - 7/3/11
BEC - 7/11/11
REG - 8/20/11
AUD - 8/31/11

[Roydizle]

I just ran across this problem too! I was shocked to find a forum on it. If this many people are having trouble with the question then there is a problem with it. Because according to the notes you can take the AOC for both dependents.

FAR - 85
AUD - 77
BEC - 81
REG - 76

Done!!!

[tumbler]

I ran into this same problem. I don't think the fact that one is a freshman and the other is a senior has anything to do with it. The question states that the freshman's educational expenses are for the fall semester, so they should still both be eligible for the AOC. Plus, the solution is using one for the LLC and the other for the AOC, so it seems like a mistake that they only applied the AOC to one child.

I'm taking my exam Monday, but couldn't resist sending this into the “Ask Becker a Question” website because their solution is so strange. I'll try to remember to post back once I get an answer. If really hope their answer is “You're right, this is a mistake” rather than “Well they could have applied it to both, but decided to only apply it to one child.”

Can't wait to be done with this garbage!

[tumbler]

I heard back from Becker. They said we are correct about the optimal answer being to claim the AOC on both children, as is allowed for that credit, and to claim the LLC on the child with the highest tuition expenses.

They say their answer is still right because it is the “most right” answer. I really hope I don't see stuff like this on the exam because it really throws you off when you're used to calculating things the way any good CPA or tax software would!

[Author]

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