If Blake elects to use actual office in home (OIH) expenses, what is the amount of...

If Blake elects to use actual office in home (OIH) expenses, what is the amount of his deduction ? Rent (entire year): $14,400 Renter's insurance (entire year): $1,055 Second phone line, exclusively for business: $103 Tax preparation (allocated to business): $350 Utilities (entire year): $2,281 1. $648 2. $743 3. $2,576 4. $2,957

Solutions

Expert Solution

Since Blake has elected to use "Actual OIH" method, the expenses that incurred for entire home would be allocated in proportion to the area of home used for business.

Note: There is no information given on the area of the house and the area used for business. So, we have referred to the same question in our database and used the areas given in the question found in the database. In case, numbers given in this regard in your question is different, simply replace the numbers and recalculate. Alternatively, you can provide the figures in comment box and we would re-calculate it for you.

Area used: 350 Square Feet
Total Area of home = 2,100 Square Feet

Proportion of home used for business = 350/2,100 = 0.1667 or 16.67%

Expense	Amount	Portion to be allocated	Deduction allowed
Rent	14,400	16.67%	2400.00
Renter's insurance	1055	16.67%	175.83
Utilities	2,281	16.67%	380.17
Total		2956.00

Deduction Allowed = Total Expense * Proportion

Hence, option 4 is correct.

Note: The expenses that are exclusively for business or allocated to business is not included in OIH deduction calculation. Hence, expense of second phone line and tax preparation are not included here.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

1. Assume that the actual amount of one of a company’s variable expenses was $45,198. The...

1. Assume that the actual amount of one of a company’s variable expenses was $45,198. The company’s planned level of activity was 19,000 machine-hours, and its actual level of activity was 18,475 machine-hours. The spending variance for this particular expense was $9,114 favorable. The cost formula per machine-hour for this expense is: $1.92. $1.96. $2.88. $2.94. 2. Assume a company is considering using available space to make 10,000 units of a component part that it has been buying from a...

Should deductions be capped to what are resonable expenses rather than actual expenses?

Julie works as at home and is self-employed. She uses 17% of her home as office space. She has the following housing expenses: Painting of office $600,

Julie works as at home and is self-employed. She uses 17% of her home as office space. She has the following housing expenses: Painting of office $600, mortgage interest total $3,200, property taxes $1,800, utilities $2,400, and depreciation (if 100% business use) of $5,000. Ignoring any income limitations, what is Julie's home office deduction?O $13,000O $1,858O $2,708O $2,210

Should deductions be capped to what are reasonable expenses rather than actual expenses? Can you think...

Should deductions be capped to what are reasonable expenses rather than actual expenses? Can you think of an example of such a restriction under the ITAA97.

Should deductions be capped to what are reasonable expenses rather than actual expenses? Can you think...

Should deductions be capped to what are reasonable expenses rather than actual expenses? Can you think of an example of such a restriction under the ITAA97.

Home office deduction amount and form to put the deduction on for 2018 draft forms? Joyce's...

Home office deduction amount and form to put the deduction on for 2018 draft forms? Joyce's office is located in a separate room in the house ad occupies 375 sq. ft. The total square footage of the house is 2,500sq.ft. The Schnappaufs purchased the home 7/3/04 for $70,000. The local practice is to allocate 10% of the purchase price to land. The depreciation percentage for the office is 0.02564. When Joyce startsd her business on 1/1/2010, the fair market value...

The actual selling expenses incurred in March 2020 by Fallon Company are as follows. Variable Expenses...

The actual selling expenses incurred in March 2020 by Fallon Company are as follows. Variable Expenses Fixed Expenses Sales commissions $11,178 Sales salaries $35,100 Advertising 12,156 Depreciation 6,500 Travel 6,912 Insurance 1,900 Delivery 3,576 (a) Prepare a flexible budget performance report for March, assuming that March sales were $172,800. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 7%, traveling 4%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,100, Depreciation on delivery...

The actual selling expenses incurred in March 2017 by Fallon Company are as follows. Variable Expenses...

The actual selling expenses incurred in March 2017 by Fallon Company are as follows. Variable Expenses Fixed Expenses Sales commissions $10,978 Sales salaries $35,100 Advertising 11,911 Depreciation 7,300 Travel 8,415 Insurance 1,900 Delivery 3,446 (a) Prepare a flexible budget performance report for March, assuming that March sales were $168,300. Variable costs and their percentage relationship to sales are sales commissions 6%, advertising 7%, traveling 5%, and delivery 2%. Fixed selling expenses will consist of sales salaries $35,100, Depreciation on delivery...

Bill has monthly gross salary of $3,000 and take-home salary of $2,100. His monthly expenses amount...

Bill has monthly gross salary of $3,000 and take-home salary of $2,100. His monthly expenses amount to $1,000 and he saves $300 per month and uses the rest to pay his debts. He has cash in checking account of $2,500, emergency fund savings account of $4,200. He also owns a car with estimated value of $12,000. He owns personal possessions valued at $3,500. His credit card debts total $750 and other short-term debts are $800. The only long-term debt he...

What amount will the seller receive at the closing? For this question, prorate using the actual...

What amount will the seller receive at the closing? For this question, prorate using the actual number of days in the month and year. Split the escrow fee 50-50. The seller will pay the revenue stamps, and the buyer will pay title insurance and the recording fee. The buyer assumes the existing mortgage balance of $127,042.42, the buyer will pay in cash at closing the difference between the purchase price and the loan balance, and the present rnonthly payment on...

Subjects