Question

Business Information

For several years, Blake owned and operated a financial planning business, BJS Financial, from his home. It is a sole proprietorship, reported on Schedule C (Form 1040). In April 2016, he won a

$15,000,000 State Lottery and closed his business. On April 10, 2016, Blake sold all the items he had been depreciating for his home business.

He used 350 square feet of his 2,100-square-foot rented loft exclusively and regularly for business. Blake used the cash accounting method and had the following income and expenses for his financial

planning business:

Gross receipts:                                                                                          $36,960

Expenses:

Advertising:                                                                                                       $80

Business insurance:                                                                                         $685

Business license:                                                                                             $100

Comprehensive health insurance (entire year):                                        $7,788

Office supplies:                                                                                                  $76

Postage                                                                                                              $38

Rent (entire year):                                                                                     $14,400

Renter's insurance (entire year):                                                              $1,055

Second phone line, exclusively for business:                                                  $103

Tax preparation (allocated to business):                                                        $350

Utilities (entire year):                                                                               $2,281

There was no carryover of unallowed expenses. There was no section 179 expense deduction taken for any of the assets that were sold April 10, 2016. Depreciation includes bonus depreciation, when avail- able. All assets were 100% business use:

Item	Date in Service	Basis	Prior Depreciation
New computer	June 15, 2013	$1,750	$623
New printer	June 15, 2013	$350	$125
Used desk and chairs	June 15, 2013	$1,200	$675

Blake disposed of his business assets in the following manner:

•    Computer-sold for $220.

•    Printer-junked at the hazardous waste center.

•   Used desk and chairs-sold for $390.

The cost of Blake's comprehensive health insurance policy was $649 monthly.

Q1) if blake elects to use actual office in home (OIH) expenses, what is the amount of his deduction?

a) $648

b) $743

c) $2576

d) $2957

Q2) If Blake elects to use the office in home (OIH) simplified method, what is the amount of his Schedule C net profit/loss?

a) $ 34,650

b) $35,015

c) $37,674

Answer 1