Infinity Production Acquired a New Machine at the Beginning of the Current

Infinity Production acquired a new machine at the beginning of the current year. The machine cost $600,000 with no residual value expected. Infinity uses the straight-line method for financial reporting, assuming a 6-year useful life. The firm classifies the equipment as 5-year MACRS property for tax purposes using the following percentages. $\begin{array}{ll}\underline{\text { Year} } & \underline{\text { MACRS} }(\%) \\1 & 20.00 \% \\2 & 32.00 \\3 & 19.20 \\4 & 11.52 \\5 & 11.52 \\6 & 5.76\end{array}$

The company is subject to a 20% income tax rate and has no other book-tax differences. Income before depreciation and tax is presented below:
$\begin{array}{cc}& \text { Income before}\\& \text { Taxand}\\\text { Year } & \text { Depreciation } \\\hline 1 & \$ 430,000 \\2 &480,000 \\3 & 550,000 \\4 & 700,000 \\5 & 820,000 \\6 & 950,000\end{array}$

What is the increase or decrease in the deferred tax liability for year 3?

A) $3,040 increase
B) $25,440 increase
C) $14,560 decrease
D) $37,600 increase