What amount can Melanie claim this year for her office in the home deduction under the Regular Method?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Problem 9-33 (LO. 5)

Melanie is employed full-time as an accountant for a national hardware chain. She recently started a private consulting 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 2020 are as follows:

Real property taxes $3,600
Interest on home mortgage 3,800
Operating expenses of home 900

Melanie'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 2019, and under the Regular Method, Melanie had an unused office in the home deduction of $800 for 2019. Assume there is sufficient net income from her consulting practice.

depreciation table below. Round deprecation to the nearest dollar.

8-7cCost Recovery Tables

Summary of Tables
Exhibit 8.3

Regular MACRS table for personalty.

  • Depreciation methods: 200 or 150 percent declining-balance switching to straight-line.

  • Recovery periods: 3, 5, 7, 10, 15, 20 years.

  • Convention: half-year.

Exhibit 8.4

Regular MACRS table for personalty.

  • Depreciation method: 200 percent declining-balance switching to straight-line.

  • Recovery periods: 3, 5, 7 years.

  • Convention: mid-quarter.

Exhibit 8.5

MACRS optional straight-line table for personalty.

  • Depreciation method: straight-line.

  • Recovery periods: 3, 5, 7, 10, 15, 20 years.

  • Convention: half-year.

Exhibit 8.6

Alternative minimum tax declining-balance table for personalty.

  • Depreciation method: 150 percent declining-balance switching to straight-line.

  • Recovery periods: 3, 5, 7, 9.5, 10, 12 years.

  • Convention: half-year.

Exhibit 8.7

Alternative depreciation system straight-line table for personalty.

  • Depreciation method: straight-line.

  • Recovery periods: 5, 10, 12 years.

  • Convention: half-year.

Exhibit 8.8

Regular MACRS straight-line table for realty.

  • Depreciation method: straight-line.

  • Recovery periods: 27.5, 31.5, 39 years.

  • Convention: mid-month.

Exhibit 8.9

Alternative depreciation system straight-line table for realty.

  • Depreciation method: straight-line.

  • Recovery period: 30, 40 years.

  • Convention: mid-month.

 
 
 
 
Exhibit 8.3MACRS Accelerated Depreciation for Personal Property Assuming Half-Year Convention (Percentage Rates)
 

*Switchover to straight-line depreciation.

Exhibit 8.4

MACRS Accelerated Depreciation for Personal Property Assuming Mid-Quarter Convention (Percentage Rates)

For Property Placed in Service after December 31, 1986 (Partial Table)
3-Year
Recovery Year First Quarter Second Quarter Third Quarter Fourth Quarter
1 58.33 41.67 25.00 8.33
2 27.78 38.89 50.00 61.11
5-Year
Recovery Year First Quarter Second Quarter Third Quarter Fourth Quarter
1 35.00 25.00 15.00 5.00
2 26.00 30.00 34.00 38.00
7-Year
Recovery Year First Quarter Second Quarter Third Quarter Fourth Quarter
1 25.00 17.85 10.71 3.57
2 21.43 23.47 25.51 27.55
Exhibit 8.5

MACRS Straight-Line Depreciation for Personal Property Assuming Half-Year Convention

For Property Placed in Service after December 31, 1986
    Other Recovery Years Last Recovery Year
MACRS Class % First Recovery Year Years % Year %
3-year 16.67   2–3   33.33   4   16.67  
5-year 10.00   2–5   20.00   6   10.00  
7-year 7.14   2–7   14.29   8   7.14  
10-year 5.00   2–10   10.00   11   5.00  
15-year 3.33   2–15   6.67   16   3.33  
20-year 2.50   2–20   5.00   21   2.50  

Note: The last two rows of this table are used for qualified improvement property (15-year normal MACRS; 20-year ADS).

 
Exhibit 8.6Alternative Minimum Tax: 150% Declining-Balance Assuming Half-Year Convention (Percentage Rates)
 

* The figures in this table are taken from the official table that appears in Rev.Proc. 87–57, 1987–2 C.B. 687. Because of its length, the complete table is not presented.

**Switchover to straight-line depreciation.

Exhibit 8.7

ADS Straight-Line for Personal Property Assuming Half-Year Convention (Percentage Rates)

For Property Placed in Service after December 31, 1986 (Partial Table)
Recovery Year 5-Year Class 10-Year Class 12-Year Class
1 10.00 5.00   4.17
2 20.00 10.00   8.33
3 20.00 10.00   8.33
4 20.00 10.00   8.33
5 20.00 10.00   8.33
6 10.00 10.00   8.33
7   10.00   8.34
8   10.00   8.33
9   10.00   8.34
10   10.00   8.33
11   5.00   8.34
12       8.33
13       4.17
 
 
 
 
 
Exhibit 8.8MACRS Straight-Line Depreciation for Real Property Assuming Mid-Month Convention* (Percentage Rates)
 

*The official tables contain a separate row for each year. For ease of presentation, certain years are grouped in these tables. In some instances, this will produce a difference of .001 for the last digit when compared with the official tables.

 
 
Exhibit 8.9ADS Straight-Line for Real Property Assuming Mid-Month Convention (Percentage Rates)
 
*Also used for residential rental property placed in service before 2018.
 
a. What amount can Melanie claim this year for her office in the home deduction under the Regular Method?

$fill in the blank 7103d7012fde02b_1

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Tax consequences of home ownership
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education