Explanation There are two options available for Ms. A for the $270,000 of circulation expenditures. Under first option , the entire amount of $270,000 should be deducted in the year 2019. When she carries out this, she will have a positive AMT of $180,000 ($270,000 − $90,000) in 2019 and negative AMT adjustments amounting to $90,000 in the year 2020 and 2021. This happens due to circulation of expenditures getting amortized over three years for purpose of determining AMT. Under second option , A can capitalize the circulation expenses and make deduction over three- year period amounting to $90,000 per year. When this is adopted, AMT adjustment is not necessary as deduction made is same as for the regular income tax purposes and AMT purposes. As per first option, if Ms. A deducts the expense in 2019, she will save a tax of $99,900 ($270,000x 37%). As per second option, if she deducts the expense at the rate of $90,000 per year over three years, the entire deduction of $270,000 will offset income and it would be taxed at 37% in all three years...

43rd Edition

ISBN: 9780357109731

Author: Hoffman

Publisher: CENGAGE LEARNING - CONSIGNMENT

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Question

Chapter 12, Problem 31P

To determine

Discuss whether Ms. A should deduct the entire expense or capitalize it and then deduct over a three year period.

Expert Solution & Answer

Chapter 12 Solutions

Individual Income Taxes

Ch. 12 - Kelly was promoted and received a substantial...Ch. 12 - Prob. 2DQ Ch. 12 - Prob. 3DQ Ch. 12 - Prob. 4DQ Ch. 12 - Prob. 5DQ Ch. 12 - Prob. 6DQ Ch. 12 - Can any nonrefundable credits, other than the...Ch. 12 - Prob. 8DQ Ch. 12 - Prob. 9DQ Ch. 12 - Prob. 10DQ

Ch. 12 - Prob. 11DQ Ch. 12 - Prob. 12DQ Ch. 12 - Prob. 13DQ Ch. 12 - Prob. 14DQ Ch. 12 - Prob. 15DQ Ch. 12 - Prob. 16DQ Ch. 12 - Prob. 17DQ Ch. 12 - During the year, Rachel earned 18,000 of interest...Ch. 12 - Compute the 2019 AMT exemption for the following...Ch. 12 - In March 2019, Serengeti exercised an ISO that had...Ch. 12 - Prob. 21CE Ch. 12 - Prob. 22CE Ch. 12 - Prob. 23CE Ch. 12 - Prob. 24CE Ch. 12 - Prob. 25CE Ch. 12 - Prob. 26P Ch. 12 - Arthur Wesson, an unmarried individual who is age...Ch. 12 - Prob. 28P Ch. 12 - Prob. 29P Ch. 12 - Lisa records nonrefundable Federal income tax...Ch. 12 - Prob. 31P Ch. 12 - Prob. 32P Ch. 12 - Prob. 33P Ch. 12 - In March 2019, Helen Carlon acquired used...Ch. 12 - Prob. 35P Ch. 12 - Prob. 36P Ch. 12 - Prob. 37P Ch. 12 - Prob. 38P Ch. 12 - Christopher regularly invests in internet company...Ch. 12 - Sammy and Monica, both age 67, incur and pay...Ch. 12 - Prob. 41P Ch. 12 - Prob. 42P Ch. 12 - Prob. 43P Ch. 12 - Prob. 44P Ch. 12 - Anh is single, has no dependents, and itemizes...Ch. 12 - Prob. 46P Ch. 12 - Prob. 47P Ch. 12 - Jane and Robert Brown are married and have eight...Ch. 12 - Prob. 49P Ch. 12 - Renee and Sanjeev Patel, who are married, reported...Ch. 12 - Prob. 51P Ch. 12 - Lynn, age 45, is single and has no dependents. Her...Ch. 12 - Prob. 53P Ch. 12 - Robert A. Kliesh, age 41, is single and has no...Ch. 12 - Prob. 55CP Ch. 12 - Prob. 1RP Ch. 12 - Prob. 2RP Ch. 12 - Prob. 3RP Ch. 12 - Prob. 1CPA Ch. 12 - Prob. 2CPA Ch. 12 - Carol reports taxable income of 48,000. Included...Ch. 12 - Prob. 4CPA

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Similar questions

Emily, who is single, sustains an NOL of 7,800 in 2019. The loss is carried forward to 2020. For 2020, Emilys income tax information before taking into account the 2019 NOL is as follows: The 2019 single standard deduction is 12,200; Emilys itemized deductions will exceed the 2020 single standard deduction (after adjustment for Inflation). The medical expense AGI floor is 10% In 2019. How much of the NOL carryforward can Emily use in 2020, and what is her adjusted gross income and her taxable income?
Chelsea, who is single, purchases land for investment purposes in 2014 at a cost of 22,000. In 2019, she sells the land for 38,000. Chelseas taxable income without considering the land sale is 100,000. What is the effect of the sale of the land on her taxable income, and what is her tax liability?

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