Rocky Has a Full-Time Job as an Electrical Engineer for the City

question 33

Essay

Rocky has a full-time job as an electrical engineer for the city utility.In his spare time,Rocky repairs TV sets in the basement of his personal residence.Most of his business comes from friends and referrals from former customers,although occasionally he runs an ad in the local suburbia newspaper.Typically,the sets are dropped off at Rocky's house and later picked up by the owner when notified that the repairs have been made.
The floor space of Rocky's residence is 2,500 square feet,and he estimates that 20% of this is devoted exclusively to the repair business (i.e. ,500 square feet).Gross income from the business is $13,000,while expenses (other than home office)are $5,000.Expenses relating to the residence are as follows:
Real property taxes
$4,500
Interest on home mortgage
8,000
Operating expenses of residence
3,000
Depreciation (based on 20% business use)
1,000
What is Rocky's net income from the repair business
​
a.If he uses the regular (actual expense)method of computing the deduction for office in the home?
b.If he uses the simplified method?

---

Definitions:

Visual Cues

Elements in the environment or in communications that provide information or directional signals through sight.

Consumption

The use of goods and services by households, which involves the selection, purchase, use, maintenance, and disposal of products.

Electronic Meetings

Meetings conducted using technology such as video conferencing or webinars to connect participants from different locations in real-time.

Group Rapport

The harmonious relationship and understanding among members of a group, fostering a sense of trust, belonging, and cooperativeness.