Fran is a CPA who has a small tax practice in addition to working as the controller for a local manufacturing business.Fran runs her tax practice out of a 150-square foot office in her home where she meets clients and works on their tax returns and researches their tax issues.She meets the exclusive use test for this space.The gross income from her tax practice amounts to $7,500 for the year.Business expenses amount to $1,000.Based on square footage, $4,000 of Fran's mortgage interest and real estate taxes are allocable to the home office.The allocable portion of maintenance, utilities, and depreciation is $4,500.Assuming no other expenses related to the business were incurred, what amount of the maintenance, utilities, and depreciation is deductible by Fran?
A)$0.
B)$2,500.
C)$3,500.
D)$4,500.
E)None of these.

Question

Quizplus · Accepted Answer

Fran can deduct maintenance, utilities, and depreciation up to the net income from her tax practice after other expenses. Her net income is $7,500 (gross income) - $1,000 (business expenses) - $4,000 (mortgage interest and real estate taxes) = $2,500. Therefore, she can deduct $2,500 of the maintenance, utilities, and depreciation.

Fran Is a CPA Who Has a Small Tax Practice