In order to supplement his income working in a craft store, Mr. John Collins has decided to start a home-based business that will specialize in selling used vintage records. Mr. Collins has always been passionate about music.

The business will be run out of space that he has set aside in his residence. This space involves 25 percent of the total floor space in the residence.

The residence was acquired on January 1, 2017 at a total cost of $345,000. It is estimated that $95,000 of this total value can be attributed to the land on which the residence is situated. For the year ending December 31, 2018, Mr. Collins has the following costs that can be associated with this residence:

Utilities for Home (Heat, Light, And Water)	$2580
Mortgage Interest Paid	$8410
House Insurance	$600
Property Taxes	$3800
Repairs and Maintenance for Home	$3100
Total	$18,490

The business begins operations on March 1, 2018. On that date, Mr. Collins acquires the following assets to be used in his new business:

Office Furniture and Storage Racks	$12,000
Computer	$1650
Accounting Software	$750

In addition, he has a separate telephone line installed for dealing exclusively with the mail order business. The telephone charge includes charges for a toll-free number and a long-distance package.

During the period March 1, 2018 through December 31, 2018, his mail order sales total $118,000. Costs associated with these sales are as follows:

Cost of Merchandise Sold	$64,000
Unsold Merchandise (Lower of Cost and Market)	$11,500
Packaging Materials	$3600
Shipping Costs	$5800
Miscellaneous Office Supplies	$660
Telephone (Total Charge for The Period)	$1350
Printing of Posters and Brochures Distributed	$680

Required:

1. Can Mr. Collins deduct workspace in the home costs? Briefly explain your conclusion. (3 marks)
2. Compute the minimum net business income or loss that Mr. Collins must report in his 2018 personal income tax return. (17 marks)

Note Mr. Collins does not want to claim CCA on his personal residence.

a)Can Mr. Collins deduct workspace in the home costs? Briefly explain your conclusion.

b)

2	Compute the minimum net business income or loss that Mr. Collins must report in his 2018 personal income tax return.
		Calculation of minimum net business income
			Yes/No	Amount
		Revenue
		Cost of mechandise sold
		Unsold Merchandise (Lower of Cost and Market)
		Packaging Materials
		Shipping Costs
		Misc. Office Supplies
		Telephone
		Printing of Psoters and Brochires
		Ankit: Show your calculation under calculation .. If you need more space , use the space right to the column H.. Do not delete or add any rows or columns here.. CCA	Yes/No
	1	Office Furniture and Storgae Racks
		Calculation
			Yes/No
	2	Ankit: Show your calculation under calculation .. If you need more space , use the space right to the column H.. Do not delete or add any rows or columns here.. Computers
		Calculation
			Yes/No
	3	Ankit: Show your calculation under calculation .. If you need more space , use the space right to the column H.. Do not delete or add any rows or columns here.. Accounting Software
		Calculation
		[Threaded comment] Your version of Excel allows you to read this threaded comment; however, any edits to it will get removed if the file is opened in a newer version of Excel. Learn more: https://go.microsoft.com/fwlink/?linkid=870924 Comment: Enter the proportionate amount directly in the amount section.. Show all your calculation to the right of column H. DO not add or delete any row or column here. Home Workspace Costs	Yes/No
		Utilities for Home
		Mortgage Interest Paid
		House Insurance
		Property Tax
		Repairs and Maintenance for Home
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