1. Bob is an attorney and sells various household goods from his home. He uses his basement to store the goods and keeps his business records in the basement as well. In 2017, Bob sold $65,000 worth of merchandise. His cost of goods sold was $47,000 and his advertising expense was $7,500. The annual costs for the upkeep of the house were $22,000. His mortgage interest expense was $7,000 and the depreciation on the house was $10,000. His annual real estate tax was $7,500. Bobs house is 3,000 square feet and his basement is 450 square feet. Did Bob recognize any taxable income in 2017 from his business? If so, how much? If not, how much expense may Bob carry forward to next year? Should Bob elect to use the simplified method in computing his deductions?

2. When an investor holds a stock that has lost nearly all of its value, the investor will often times sell the stock to her stock broker for the total sum of $1. Why do they do that? Legally, what happens if the company recovers and the stock becomes worth $1 million?