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David is a college professor who does some consulting work on the side. He uses

ID: 2363942 • Letter: D

Question

David is a college professor who does some consulting work on the side. He uses 25% of his home exclusively for the consulting practice. He is single and 63 years old. His AGI (without consideration of consulting income) is $45,000.00. Other information follows: Income from consulting business $4000.00 Consulting expenses other than home office $1500.00 Total costs relating to home: Interest and taxes $6500.00 Utilities $1500.00 Maintenance and repairs $ 450.00 Depreciation (business part only) $1500.00 Calculate David

Explanation / Answer

David is a college professor who does some consulting work on the side. He uses 25% of his home exclusively for the consulting practice. He is single and 63 years old. His AGI (without consideration of consulting income) is $45,000. Other information follows:

Income from consulting business                                $4,000

Consulting expenses other than home office              $1,500

Total costs relating to home                           

Interest and taxes                                            $6,500

Utilities                                                           $1,500

Maintenance and repairs                                 $   450

Depreciation (business part only)                    $1,500

Calculate David’s AGI.                                            

Answer:

            AGI before business                                                                        $45,000

                        Business Proceeds                                   $4,000

                        Business Expenses                                   -$1,500

                        Interest & Taxes                                      -$1,625*

                        Utilities                                                     -$   375

                        Main. And Repairs                                 -$   113

                        Depreciation limited to $387                   -$   387  

                                                Net Business Income                                   0

                                                                                          AGI          $45,000

*75% of this amount would be deductible on Schedule A as an itemized deduction.

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