Vicki owns and operates a news agency (as a sole proprietorship). During 2017, she incurred expenses of $24,000 to increase circulation of newspapers and magazines that her agency distributes. For regular income tax purposes, she elected to expense the $24,000 in 2017. In addition, Vicki incurred $15,000 in circulation expenditures in 2018 and again elected expense treatment. What AMT adjustments will be required in 2017 and 2018 as a result of the circulation expenditures?
A)$16,000 positive in 2017, $2,000 positive in 2018.
B)$16,000 negative in 2017, $2,000 positive in 2018.
C)$16,000 negative in 2017, $10,000 positive in 2018.
D)$16,000 positive in 2017, $10,000 positive in 2018.
E)None of the above.

Question

Quizplus · Accepted Answer

For AMT purposes, circulation expenditures must be capitalized and amortized over 3 years. In 2017, Vicki expensed $24,000, but for AMT, she should have capitalized and amortized $8,000 per year, resulting in a $16,000 positive AMT adjustment. In 2018, she should have amortized $8,000 of the 2017 expenses and $5,000 of the 2018 expenses, resulting in a $2,000 positive AMT adjustment.

Vicki Owns and Operates a News Agency (As a Sole