Vicki Owns and Operates a News Agency (As a Sole

question 48

Multiple Choice

Vicki owns and operates a news agency (as a sole proprietorship) .During 2015,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 2015.In addition,Vicki incurred $15,000 in circulation expenditures in 2016 and again elected expense treatment.What AMT adjustments will be required in 2015 and 2016 as a result of the circulation expenditures?

• A)$16,000 positive in 2015,$2,000 positive in 2016.
• B)$16,000 negative in 2015,$2,000 positive in 2016.
• C)$16,000 negative in 2015,$10,000 positive in 2016.
• D)$16,000 positive in 2015,$10,000 positive in 2016.
• E)None of the above.

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Definitions:

Compliance Costs

Expenses incurred by businesses or organizations in order to adhere to laws, regulations, and guidelines.

U.S. Income Tax

A tax imposed by the U.S. government on the income earned by individuals, corporations, trusts, and other legal entities.

Saving

The process of setting aside a portion of current income for future use or for investment purposes.

Consumption Tax

Taxes applied on spending on goods and services, such as sales tax or Value Added Tax (VAT).