Ms. Jill Jones wanted to start a home-based business that would specialize in selling t-shirts. The business would be operated from her principal residence. She set aside 10% of the total floor space in the residence for the t-shirt operations.

Ms. Jill Jones principal residence, costing $990,000 in total, was acquired on January 1, 2018. It is estimated that $290,000 of this total value can be attributed to the land value.

Ms. Jill Jones incurred the following 2018 costs relating to the principal residence:

Utilities for the Home (Heat, Light, and Water)	$ 3,500
Mortgage Interest Paid	8,000
House Insurance	7,300
Property Taxes	9,500
Repairs & Maintenance for the Home	6,600
Total House Costs	$ 34,900

The business commenced operations on March 01, 2018. On that date, Ms. Jill Jones purchased the following assets to be used in her new business:

Office Furniture & Shelving	$ 50,000
Computer	5,000
Business Software	3,000
Total Purchases	$ 58,000

In addition, Ms. Jill Jones had a separate telephone line installed for dealing with the mail order business.

During the period March 1, 2018, through December 31, 2018, Ms. Jill Jones mail order sales totaled $500,000. Costs associated with these sales included the following:

Cost of Merchandise Purchased	$ 280,000
Unsold Merchandise at December 31, 2018	40,000
Packaging Materials	10,000
Mailing Costs	9,900
Office Supplies	5,500
Telephone Charges	4,300
Printing of Brochures	20,000
Membership in Yacht Club	9,000
Meals & Entertainment Costs	8,000
Total Costs	$ 386,700

Required

1. Can Ms. Jill Jones deduct work space in the home costs? Briefly explain your decision.

2. Calculate Ms. Jill Jones 2018 minimum net business income or loss that she will report on her 2018 income tax return.

3. Briefly discuss any issues that should be discussed with Ms. Jill Jones regarding the work space in her home and business costs.