In Which of the Following Independent Situations Is the Taxpayer

question 54

Multiple Choice

In which of the following independent situations is the taxpayer entitled to deduct expenses related to the home office?
I.A real estate agent employed by a local real estate agency owns several rental properties. She regularly and exclusively uses a second bedroom in her home solely as an office for bookkeeping and other activities related to management of the rental properties. She has no other place to perform these functions.
II.An attorney employed by a large law firm frequently brings work home from the office. She uses a study in her home for doing this work as well as managing her investment portfolio.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Fiduciary Fund

A fund used to account for assets held by a government in a trustee or agency capacity for individuals, private organizations, or other governments.

Special Revenue Fund

A fund used by a government to account for revenue from specific sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects.

General Fund

The general fund is the primary operating fund of a government, supporting general activities and services such as public safety, parks, and general administration.

Agency Fund

A fiduciary account used by governmental entities to manage funds collected on behalf of others, such as taxes or grants.