Dighi, an artist, uses a room in his home (250 square feet) as a studio exclusively to paint. The studio meets the requirements for a home office deduction. (Painting is considered his trade or business.) The following information appears in Dighi's records:
$\begin{array}{llr}
\text {Revenue from sale of paintings } &\$4,000\
\text { Expenses attributable to business of painting such as supplies } &1,800\
\end{array}$
Expenses related to home office:
$\begin{array}{llr}
\text { Property taxes on portion of home where he paints } &900\
\text { Utilities, insulance, etc} &700\
\text { Depreciation of portion of home } &800
\end{array}$
(a) What is the amount of Dighi's home office deduction if he is self-employed?
(b) If some amount is not allowed under the tax law, how is the disallowed amount treated?
(c) Assume all of Dighi's records of expenses relating to the room were destroyed in a major paint spill. How much of a home office deduction, if any, will he be allowed?

Question

Dighi, an artist, uses a room in his home (250 square feet) as a studio exclusively to paint. The studio meets the requirements for a home office deduction. (Painting is considered his trade or business.) The following information appears in Dighi's records:
 $\begin{array}{llr}
  \text {Revenue from sale of paintings  } &\$4,000\
 \text { Expenses attributable to business of painting such as supplies } &1,800\
\end{array}$
 Expenses related to home office:
 $\begin{array}{llr}
  \text { Property taxes on portion of home where he paints } &900\
 \text {   Utilities, insulance, etc} &700\
 \text { Depreciation of portion of home } &800
\end{array}$
 (a) What is the amount of Dighi's home office deduction if he is self-employed?
(b) If some amount is not allowed under the tax law, how is the disallowed amount treated?
(c) Assume all of Dighi's records of expenses relating to the room were destroyed in a major paint spill. How much of a home office deduction, if any, will he be allowed?

Quizplus · Accepted Answer

The Answer of Dighi, an artist, uses a room in his home (250 square feet) as a studio exclusively to paint. The studio meets the requirements for a home office deduction. (Painting is considered his trade or business.) The following information appears in Dighi's records:
 $\begin{array}{llr}
  \text {Revenue from sale of paintings  } &\$4,000\
 \text { Expenses attributable to business of painting such as supplies } &1,800\
\end{array}$
 Expenses related to home office:
 $\begin{array}{llr}
  \text { Property taxes on portion of home where he paints } &900\
 \text {   Utilities, insulance, etc} &700\
 \text { Depreciation of portion of home } &800
\end{array}$
 (a) What is the amount of Dighi's home office deduction if he is self-employed?
(b) If some amount is not allowed under the tax law, how is the disallowed amount treated?
(c) Assume all of Dighi's records of expenses relating to the room were destroyed in a major paint spill. How much of a home office deduction, if any, will he be allowed?

Dighi, an Artist, Uses a Room in His Home (250