Colin, a self-employed consultant, uses a room of his home as a business office. This room represents 10 percent of the home's square footage. This year, Colin incurred the following expenses in connection with his home: UseTable 7-3andTable 7-4.

Home mortgage interest$12,980Property tax on residence2,200Homeowner's insurance1,475Utilities2,100Furnace repairs300

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.

1. Required:If Colin's gross business income exceeded his operating expenses by $75,000, compute his net profit for the year.

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