Question

8-26 Home Office Computations. T is self-employed and tutors students at State University. Outside of her university work she occasionally provides some ac- counting services. T does all her work for these outside pursuits in her home office. Income and expenses relating to these were: $2,000 400 500 Income: Fees for services .......... Expenses: Depreciation on home office furniture and computer ......... Miscellaneous supplies, books, etc........ Expenses attributable to home office: Depreciation........ Insurance and utilities. ............... Taxes ................................................. Interest............................................ 500 ILIO I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 300 700 a. Using the general method, determine the tax consequences resulting from T's part-time activities. b. Using the optional simplified method, determine the tax consequences result- ing from T's part-time activities. Assume that the square footage used for the home office is 120 square feet.

Answer 1

Ans.(a).

	Particulars	Amount
	Fees from Services	$2,000
Less:	Depreciation on Home office	$400
	Miscellaneous Supplies	$500
	Depreciation	$500
	Insurance and Utilities	$700
	Taxes	$300
	Interest	$700
	Profit/ (Loss) from Operations	($1,100)

T would be allowed to carry forward this loss to subsequent years.

Ans.(b).

	Particulars	Amount
	Fees from Services	$2,000
Less:	Depreciation	$500
	Insurance and Utilities	$700
	Taxes	$300
	Interest	$700
	Profit/ (Loss) from Operations	($200)

T would be allowed to carry forward this loss to subsequent years.