Colin, a self-employed consultant, uses a room of his home as a business office. This room represents 10 percent of the homes square footage. This year, Colin incurred the following expenses in connection with his home. Use Table 7-3 and Table 7-4.

Home mortgage interest $ 12,980

Property tax on residence 2,200

Homeowners insurance 1,475

Utilities 2,100

Furnace repairs 300

Colin purchased the home in 2000 for $225,000. For MACRS depreciation purposes, he allocated $185,000 to the building and $40,000 to the land.

If Colins gross business income exceeded his operating expenses by $75,000, compute his net profit for the year.

If Colins gross business income exceeded his operating expenses by $1,800, compute his net profit for the year.