Fran Is a CPA Who Has a Small Tax Practice

question 116

Multiple Choice

Fran is a CPA who has a small tax practice in addition to working as the controller for a local manufacturing business. Fran runs her tax practice out of a 150 square foot office in her home where she meets clients and works on their tax returns and researches their tax issues. She meets the exclusive use test for this space. The gross income from her tax practice amounts to $7,500 for the year. Business expenses amount to $1,000. Based on square footage, $4,000 of Fran's mortgage interest and real estate taxes are allocable to the home office. The allocable portion of maintenance, utilities, and depreciation is $4,500. Assuming no other expenses related to the business were incurred, what amount of the maintenance, utilities, and depreciation is deductible by Fran?

• A) $0.
• B) $2,500.
• C) $3,500.
• D) $4,500.
• E) None of the above.

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Definitions:

Defense Mechanism

Psychological strategies used unconsciously to protect oneself from anxiety arising from unacceptable thoughts or feelings.

Identification

A psychological process in which an individual assimilates attributes, beliefs, or standards of another person or group.

Sublimation

A defense mechanism by which socially unacceptable impulses or idealizations are transformed into socially acceptable actions or behaviors.

Projection

A defense mechanism where individuals attribute their own unwanted feelings, desires, or impulses onto someone else.