Congress recently enacted a nonrefundable credit based on the cost of qualifying alcohol and drug abuse counseling programs provided by any corporate employer to its employees. the credit is limited to 50 percent of the total cost of the program. if a corporation elects the credit, none of the program costs are allowed as a deduction. any credit in excess of current year tax may not be carried back or forward to another year. tmm corporation spent $80,000 for a qualifying counseling program this year.

if tmm has $500,000 taxable income before consideration of this expense, should it elect the credit or deduct the program’s cost as an ordinary business expense?

9. tax types: taxes are classified based on whether they are applied directly to income, called direct taxes, or to some other measurable performance characteristic of the firm, called indirect taxes. identify each of the following as a “direct tax,” an “indirect tax,” or something else: a. corporate income tax paid by a japanese subsidiary on its operating income b. royalties paid to saudi arabia for oil extracted and shipped to world markets c. interest received by a u. s. parent on bank deposits held in london d. interest received by a u. s. parent on a loan to a subsidiary in mexico e. principal repayment received by u. s. parent from belgium on a loan to a wholly owned subsidiary in belgium f. excise tax paid on cigarettes manufactured and sold within the united states g. property taxes paid on the corporate headquarters building in seattle h. a direct contribution to the international committee of the red cross for refugee relief i. deferred income tax, shown as a deduction on the u. s. parent’s consolidated income tax j. withholding taxes withheld by germany on dividends paid to a united kingdom parent corporation