Rocky has a full-time job as an electrical engineer for the city utility. In his spare time, he repairs electronic gear in the basement of his personal residence. Most of his business comes from friends and referrals from former customers, although occasionally he runs an ad in the local suburbia newspaper. Typically, the items are dropped off at Rockys house and later picked up by the owner when notified that the repairs have been made. The floor space of Rockys residence is 2,500 square feet, and he estimates that 20% of this is devoted exclusively to the repair business (i.e., 500 square feet). Gross income from the business is $13,000; expenses (other than home office) are $5,000. Expenses relating to the residence are as follows:

Real property taxes	$4,500
Interest on home mortgage	8,000
Operating expenses of residence	3,000
Depreciation (based on 20% business use)	1,000

What is Rockys net income from the repair business?

a. If he uses the regular (actual expense) method of computing the deduction for office in

the home?

b. If he uses the simplified method?