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

question 3

Essay

Rocky has a full-time job as an electrical engineer for the city utility. In his spare time, Rocky repairs electronic gear 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 items 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:

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:

Oil Shale

A sedimentary rock consisting of organic materials that can be processed to produce shale oil, a type of unconventional petroleum.

Geologic Structure

The arrangement and relationship of rock layers and formations, shaped by tectonic forces, that reveals the history of Earth's crust.

Anticlines And Synclines

Geological features where rock layers are folded upwards to form ridges (anticlines) and downwards to form troughs (synclines), often due to tectonic forces.

Thrust Faults

A type of fault where rocks on one side are pushed up and over rocks on the other, often associated with mountain building.