1. Mike, a self-employed photographer, uses 300 square feet of his 1,500 square foot home exclusively for

business. Mike had income of $20,000 from the business and expenses of $6,000 before considering the

following home office expenses:

Repairs to dark room

in his work space

$ 500

Property Taxes

$ 1,500

Mortgage Interest

$ 7,500

Insurance

$ 200

Home Repairs

$ 1,000

Utilities

$ 2,400

Depreciation

$ 3,840

What is Mike's home office expense deduction for the current year?

2. Wilson Corporation granted an incentive stock option to Reva on January 1, 2018. The option price was

$300, and the FMV of the Wilson stock was also $300 on the grant date. The option allowed Reva to

purchase 150 shares of Wilson stock. Reva exercised the option on August 1, 2020, when the stock's

FMV was $400. Reva sells the stock on December 5, 2021 for $450 per share. Determine the

Amount and character(i.e., ordinary, LTCG or STCG) of income recognized by Iris and the deduction

allowed Ruby Corporation in 2017, 2019 and 2020 under the following assumptions:

a. The stock option is an incentive stock option.

Reva's Income (Ordinary/STCG/LTCG) Wilson's Deduction

2018 option grant 24000

2020 option exercise 40000

2021 stock sale 16000

b. The stock option is a nonqualified stock option.

Reva's Income (Ordinary/STCG/LTCG) Wilson's Deduction

2018 option grant

2020 option exercise

2021 stock sale