Brad and Valerie decided to adopt a child and contacted an adoption agency in August 2012. After extensive interviews and other requirements (such as financial status, etc.), Brad and Valerie were approved as eligible parents to adopt a child. The agency indicated that it might take up to two years to find a proper match. In March 2013, the adoption became final, and Brad and Valerie adopted an infant daughter (not a special needs child). Below is a list of expenses that they incurred:
2012: Agency fees (first installment) ................................ $5,000
Travel expenses for interviews, etc. ................................. 1,500
Publications for prospective adoptive parents ..................... 300
Legal fees connected with the adoption ............................ 1,000
Kennel fees for dog while on adoption trips ....................... 250
2013: Agency fees (final installment) .............................. $4,000
Travel expenses ....................................................... 400
Court costs for adoption ............................................. 1,500
Kennel fees ............................................................ 100
Nursery furniture (baby's room) and supplies .................... 2,000
Brad and Valerie's AGI in 2012 was $70,000, and in 2013 was $90,000.
a. Compute Brad and Valerie's qualified adoption expenses for 2012 and 2013
b. Compute Brad and Valerie's adoption credit. In which year(s) may the credit be taken?
c. Would your answer to Part b change if the adopted child was a special needs child and if a grant covered all adoption cost except for legal fees.