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Nellie is a self-employed consultant who uses 25 % of her residence as an office....

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Accounting

Nellie is a self-employed consultant who uses 25 % of her residence as an office. The office is used exclusively for business and is frequented by customers on a regular basis. Nellie also uses her den as an office (5 of the total floor space of her home) to prepare bills and keep records. However, the den is also used by her children as a TV room. In 2017, Nellie's net income from the consulting business (other than her home office expenses) amounts to $60,000. She also incurs $1,000of expenses directly related to the office (e.g., painting of the office, window blinds). Nellie incurs the following expenses in 2017 related to her residence:

Real estate taxes

$3,400

Mortgage interest

8,000

Insurance

1,500

Depreciation

6,500

Repairs and utilities

1,800

Total $21,200

a. Which of the expenditures (if any) are deductible for 2017? Are they for AGI or from AGI deductions? How would your answers change if the tax year were 2018 rather than 2017?

b. Would your answer to Part a change if Nellie's net income from consulting were only $5,650 for the year? What is the amount of the office-in-home deduction and the amount of the carryover (if any) of the unused deductions?

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