Alfredo Is Self-Employed and He Uses a Room in His

question 88

Essay

Alfredo is self-employed and he uses a room in his home as his principal place of business.He meets clients there and doesn't use the room for any other purpose.The size of his home office is 600 square feet.The size of his entire home is 3,000 square feet.During the current year,Alfredo received $10,000 of gross income from his business activities,and he reports $7,500 of business expenses unrelated to his home office.For his entire home,he reported $10,000 of mortgage interest,$2,000 of property taxes,$2,500 of home operating expenses,and $4,500 of depreciation expense.What amount of home office expenses is Alfredo allowed to deduct in the current year? (Assume he uses the actual expense method of computing home office expenses.)Indicate the amount and type of expenses he must carry over to next year,if any.

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Definitions:

Division Profits

The earnings attributed to a specific branch or department within a larger organization, reflecting its financial performance.

Profit Centers

Individual departments or units within a business that are responsible for generating their own profits.

Decision Making

The process of identifying and choosing alternatives based on the values and preferences of the decision maker.

Cost Center

A business unit or department that incurs expenses but does not directly generate revenues, typically evaluated on its cost efficiency.