In order to supplement his income working in a Calgary bookstore, Mr. Victor Larson has decided to start a home based business that will specialize in selling used textbooks to university and college students.
The business will be run out of space that he has set aside in his residence. This space involves 18 percent of the total floor space in the residence.
The residence was acquired on January 1, 2020 at a total cost of $426,000. It is estimated that $150,000 of this total value can be attributed to the land on which the residence is situated. For the year ending December 31, 2020, Mr. Larson has the following costs that can be associated with this residence: Required:
A. Can Mr. Larson deduct work space in the home costs? Briefly explain your conclusion.
B. Compute the minimum net business income or loss that Mr. Larson must report in his 2020 personal income tax return.
C. Briefly describe any issues that should be discussed with Mr. Larson concerning the work space in his home and business costs.

Question

In order to supplement his income working in a Calgary bookstore, Mr. Victor Larson has decided to start a home based business that will specialize in selling used textbooks to university and college students.
The business will be run out of space that he has set aside in his residence. This space involves 18 percent of the total floor space in the residence.
The residence was acquired on January 1, 2020 at a total cost of $426,000. It is estimated that $150,000 of this total value can be attributed to the land on which the residence is situated. For the year ending December 31, 2020, Mr. Larson has the following costs that can be associated with this residence:  Required:
A. Can Mr. Larson deduct work space in the home costs? Briefly explain your conclusion.
B. Compute the minimum net business income or loss that Mr. Larson must report in his 2020 personal income tax return.
C. Briefly describe any issues that should be discussed with Mr. Larson concerning the work space in his home and business costs.

Quizplus · Accepted Answer

The Answer of In order to supplement his income working in a Calgary bookstore, Mr. Victor Larson has decided to start a home based business that will specialize in selling used textbooks to university and college students.
The business will be run out of space that he has set aside in his residence. This space involves 18 percent of the total floor space in the residence.
The residence was acquired on January 1, 2020 at a total cost of $426,000. It is estimated that $150,000 of this total value can be attributed to the land on which the residence is situated. For the year ending December 31, 2020, Mr. Larson has the following costs that can be associated with this residence:  Required:
A. Can Mr. Larson deduct work space in the home costs? Briefly explain your conclusion.
B. Compute the minimum net business income or loss that Mr. Larson must report in his 2020 personal income tax return.
C. Briefly describe any issues that should be discussed with Mr. Larson concerning the work space in his home and business costs.

In Order to Supplement His Income Working in a Calgary