Frank is a self-employed architect who maintains a qualifying office in his home. Frank has $80,000 gross income from his practice and incurs $72,000 in salaries, supplies, computer services, etc. Frank's mortgage interest and real estate taxes allocable to the office total $3,000. Other expenses total $9,000 and consist of depreciation, utilities, insurance, and maintenance. Frank's total office in home deductions are
A)$3,000
B)$5,000
C)$8,000
D)$9,000
E)$12,000

Question

Quizplus · Accepted Answer

To calculate Frank's total office in home deductions, we need to find his total expenses for maintaining his home office. This includes his mortgage interest and real estate taxes, other expenses such as depreciation, utilities, insurance, and maintenance, and any other expenses directly related to his practice (salaries, supplies, computer services, etc.).

So, we add together the following:

- Mortgage interest and real estate taxes allocable to the office: $3,000
- Other expenses (depreciation, utilities, insurance, and maintenance): $9,000
- Direct expenses related to his practice (salaries, supplies, computer services, etc.): $72,000

When we add all of these together, we get $84,000 in total expenses. However, Frank's gross income from his practice is only $80,000. This means that we can only deduct up to $80,000 in expenses from his income.

Therefore, Frank's total office in home deductions are $80,000 (max allowable expenses) - $72,000 (direct expenses related to his practice) - $3,000 (mortgage interest and real estate taxes allocable to the office) - $1,000 (difference between total expenses and max allowable expenses) = $8,000.

The correct answer is C) $8,000.

Frank Is a Self-Employed Architect Who Maintains a Qualifying Office