Angela, who is single, incurs circulation expenditures of $153,000 during 2016. She is deciding whether to deduct the entire $153,000 or to capitalize it and elect to deduct it over a three-year period. Angela already knows that she will be subject to the AMT for 2016 at both the 26% and 28% rates. Angela is in the 28% bracket for regular income tax purposes this year; she reports regular taxable income of $153,000 before considering the circulation expenses. Angela expects to be in the 28% regular tax bracket in 2017 and 2018. If an answer is zero enter “0”.
a. If Angela deducts the entire $153,000 in 2016, she will have a positive AMT adjustment of $ in 2016 and negative adjustments of $_______ in 2017 and $______ in 2018.
b. If Angela elects to capitalize the circulation expenses and deduct them over a three-year period, the AMT adjustment is $_______ for each year. Note: Round tax computations to two decimal places and then round your final answer to the nearest dollar. Access the tax rate schedules to use for this problem.
c. If Angela deducts the $153,000 in 2016, her total tax savings over the three years will be $_______. Ignoring the time value of money, if she elects to capitalize the circulation expenses, her total tax savings over the three years will be $_______. Assume a discount rate of 4%. The present value factors at 4% are: Year 1: 1.00000; Year 2: 0.92456 and Year 3: 0.88900. If she elects to capitalize the circulation expenses, her total tax savings over the three years, assuming a discount rate of 4%, will be $______.