Melanie is employed full-time as an accountant for a national hardware chain. She recently started a privateconsulting practice, which provides tax advice and financial planning to the general public. For this purpose,she maintains an office in her home. Expenses relating to her home for 2014 are as follows:Real property taxes$3,600Interest on home mortgage $3,800Operating expenses of home $900Melanie's residence cost $350,000 (excluding land) and has living space of 2,000 square feet, of which 20%(400 square feet) is devoted to business. The office was placed in service in February 2013, and under theregular method, Melanie had an unused office in the home deduction of $800 for 2013. Presuming sufficientnet income from her consulting practice, what is Melanie's office in the home deduction under the:a. Regular methodb. Simplified method

Step 1: Step 2: Step 3: Step 4:

Answered: Melanie is employed full-time as an…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cindy, who is self-employed, maintains an office in her home that comprises 10% (340 square feet) of total floor space. Gross income for her business is $54,650, and her residence expenses are as follows: Real property taxes $4,092 Interest on mortgage 6,820 Operating expenses 3,410 Depreciation (based on 10% business use) 8,075 a. What is Cindy's office in the home deduction based on the regular method? b. What is Cindy's office in the home deduction based on the simplified method?

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