Please, help me on these questions. Thank you Question 4 : Christine is a full-t
ID: 2809917 • Letter: P
Question
Please, help me on these questions. Thank you
Question 4 : Christine is a full-time teacher of the fourth grade at Vireo Academy. During the current year, she spends $1,400 for classroom supplies. On the submission of adequate substantiation, Vireo reimburses her for $500 of these expenses—the maximum reimbursement allowed for supplies under school policy. a. What are the income tax consequence of the $1,400, if Christine chooses to itemize her deductions from AGI? She can claim the educator's deduction in the amount of ___ ___ AGI and ___ is an employee business expense which is ___ b. What are the income tax consequences of the $1,400, if Christine claims the standard deduction? She can claim the educator's deduction in the amount of ___ ___ AGI. Question 3 : Melanie is employed full-time as an accountant for a national hardware chain. She also has recently started a private consulting practice, which provides tax advice and financial planning to the general public. For this purpose, she maintains an office in her home. Expenses relating to her home for 2018 are as follows: Real property taxes $5,250 Interest on home mortgage $6,300 Operating expenses of home $1,313 Melanie's residence cost $397,000 (excluding land) and has living space of 2,000 square feet, of which 18% (360 square feet) is devoted to business. The office was placed in service in February 2017, and under the Regular Method, Melanie had an unused office in the home deduction of $700 for 2017. Assume there is sufficient net income from her consulting practice. a. What is Melanie's office in the home deduction under the Regular Method. Round your final answer to nearest dollar. b. What is Melanie's office in the home deduction under the Simplified Method
Explanation / Answer
Question 4:
Answer 4 (a): The $650 residual can be claimed as an itemized deduction (subject to the 2% of AGI floor)
Answer 4 (b): If Christine claims the standard deduction, she can still claim the educator’s deduction of $250. Because she accounts to her employer, $500 of these expenses is offset by the reimbursement. The balance of $650 ($1,400 – 250 – 500) is nondeductible.
Question 3 :
Answer (a).
The office in the home expense of $4,847 is determined as follows:
Real property taxes (18% × $5,250) $ 945
Interest on home mortgage (18% × $6,300) 1134
Operating expenses on home (18% × $1313) 236
Allocated depreciation on home 1,832
Total $ 4147
In addition to the $4,147 (related to 2018 business use of the home), Melanie can claim the $700 of unused home office deductions from the prior year.
So in total, Melanie can claim an office in the home expense of $4,847 ($4,147 + $700).
The depreciation is determined as follows: 18% × [$397,000 (cost of residence) × .02564 (depreciation factor) = $1,832 (rounded)].
Because Melanie is self-employed as to her consulting activity, the expenses are deductions for AGI,
The real property taxes and interest not claimed, $4,305 ($5,250 $945) and $5,166 ($6,300 $1134), qualify as itemized deductions from AGI.
Answer (b).
Melanie's office in the home deduction is $1,500 under the simplified method.
Although $5 per square foot is allowed and 360 square feet is involved—yielding $1,800 ($5 × 360)—the maximum allowed is $1,500 (300 square feet × $5 per square foot). Also, the unused deduction from the prior year ($700) cannot be used. Finally, the $300 not allowed ($1,800 $1,500) in 2018 cannot be carried over to 2019.