Question

Which, if any, of the following is an advantage of using the simplified method for determining the office use of a home deduction compared to using the regular method? a. No depreciation on computer equipment used in the office has to be computed using the simplified method. b. The exclusive use requirement does not have to be met if the simplified method is used. c. The simplified method allows the taxpayer to avoid issues that arise in allocating expenses of operating the home between business and personal use. d. The simplified method can be used for a residence that is rented (not owned) by the taxpayer. e. None of these is correct.

Answer 1

Ans.

c. The simplified method allows the taxpayer to avoid issues that arise in allocating expenses of operating the home between business and personal use

This option is correct. You need not distribute expenses between home & business. In this method the office use of a home deduction is based on area. That is we calculate the area that is used exclusively for business in home & allocate the expenses at the rate of standard $5 per square foot used to determine home business deduction. Allowable square footage of home use for business (not to exceed 300 square feet).

Other options are incorrect because :

a. No depreciation on computer equipment used in the office has to be computed using the simplified method - This is incorrect because this method does not require calculation of home depreciation only, while other depreciation are calculated as usual.

b. The exclusive use requirement does not have to be met if the simplified method is used - No, exclusive use requirement have to be met even if the simplified method is used.

d. The simplified method can be used for a residence that is rented (not owned) by the taxpayer - This is correct but it does not give advantage to tenant. Instead it is better to use regular method here compared to simplified method.