Brooke owns a sole proprietorship in which she works as a management consultant.

She maintains an office in her home where she meets with clients, prepares bills, and performs other work-related tasks. The home office is 300 square feet and the entire house is 4,500 square feet. Brooke incurred the following home-related expenses during the year. Unless indicated otherwise, assume Brooke uses the actual expense method to compute home office expenses.

Real property taxes $ 3,600 Interest on home mortgage 14,000 Operating expenses of home 5,000 Depreciation 12,000 Repairs to home theater room 1,000

a) What amount of each of these expenses is allocated to the home office?

b) What are the total amounts of tier 1, tier 2, and tier 3 expenses, respectively, allocated to the home office?

c) If Brooke reported $2,000 of Schedule C net income before the home office expense deduction, what is the amount of her home office expense deduction and what home office expenses, if any, would she carry over to next year?

d) Assuming Brooke reported $2,000 of Schedule C income before the home office expense deduction, complete Form 8829 for Brooke’s home office expense deduction. Also assume the value of the home is $500,000 and the adjusted basis of the home (exclusive of land) is $468,019.

e) Assume that Brooke uses the simplified method for computing home office expenses. If Brooke reported $2,000 of Schedule C net income before the home office expense deduction, what is the amount of her home office expense deduction and what home office expenses, if any, would she carry over to next year?

Use the following facts to answer problems 67 and 68.

Rita owns a sole proprietorship in which she works as a management consultant. She maintains an office in her home (500 square feet) where she meets with clients, prepares bills, and performs other work-related tasks. Her business expenses, other than home office expenses, total $5,600. The following home-related expenses have been allocated to her home office under the actual expense method for calculating home office expenses.

Real property taxes $1,600 Interest on home mortgage 5,100 Operating expenses of home 800 Depreciation 1,600 Also, assume that not counting the sole proprietorship, Rita’s AGI is $60,000.