Darren is self-employed, and has been in business for 4 years. He is a marketing consultant, code 541910, Darren Stevens Consulting. He uses the cash method of accounting. During the current year, Darren recorded the following items of income:

Revenue from clients $300,225

The following expenses were recorded on the office books. The office is located at 400 Tobacco Pocket, Urbana MN 56667

Malpractice and casualty/renters insurance 37,500 Long distance/cell phone/internet/cable 600 Office staff salaries, gross 51,000

Employers share of FICA 3,902

Employees share of FICA 3,902

Employees Fed W/H on staff salaries 5,100

Employees State W/H on staff salaries 1,500 Office Rent payments 15,000 Office magazine subscriptions 150 Office supplies 24,000 Marketing journals 330 Uncollectible receivables written off 2,500 Freelance artists 32,000 Legal and other services 12,000

Darren filed all appropriate 1099s and W-2s. Darren does not provide any health insurance for his employees, nor does he have a health insurance plan through his business.

Samantha owns and operates a barley and hop farm on the outskirts of town. Her Crop production activity code is 111900. She has no employees and does all the work herself. She is not required to file and 1099s.

These commodities have risen in price as a result of the demand by Granite City Food and Brew, so they sell every last ounce every fall, then buy seed and shoots for planting in the spring. She has been profitable for 3 years running. The seed and shoots cost $500 for the year, and they sold produce for $10,600 plus $550 of honey this year. They also have the following expenses: fertilizer $1,100, electricity $770, insurance $235, equipment repairs $960, fumigation services $1,200, $1,000 property taxes (already mentioned) and $3,600 custom hired help during harvest . She has $125 of ACRS depreciation and $262 of MACRS depreciation this year for equipment placed in service in previous years. TIP: use form 4562 page 1 to report this depreciation.

Darren owns a building (at 200 Tobacco Road, Urbana, MN) rents it out under a commercial lease for the whole year, for part of the building. The commercial tenant pays its own share of maintenance and utilities. The tenant pays Darren $2,400 per month for the space. The Tenant also paid Darren $1,125 in October for the tenants share of taxes. Darrens property taxes for the whole rental building is $3,500 (already mentioned) but Darren has not rented out the whole building. Most of the building is unoccupied. Darren has been trying to rent it out since then, by listing it, advertising it and by signage. The utilities and phone to the 1600 square feet are separately metered, so the tenant pays those amounts directly to Charter and Xcel. The tenant is responsible for its own janitorial and maintenance fees. According to your depreciation schedules, this years depreciation is $7,692 MACRS. Use form 4562 page 1 to properly report the depreciation.

Darrens additional rental expenses are: Mortgage interest 10,000 Utilities 3,750 Maintenance and janitorial 3,000 Insurance 1,000

He filed all required 1099s.

Which of the following 3 scenarios will be qualified as business deduction Form (8995)?