Rita owns a sole proprietorship in which she works as amanagement consultant. She maintains an office in her home (500square feet) where she meets with clients, prepares bills, andperforms other work-related tasks. Her business expenses, otherthan home office expenses, total $5,820. The following home-relatedexpenses have been allocated to her home office under the actualexpense method for calculating home office expenses.
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| Real property taxes | $ | 1,710 |
| Interest on home mortgage | | 5,265 |
| Operating expenses of home | | 855 |
| Depreciation | | 1,666 |
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Also, assume that, not counting the sole proprietorship, Rita’sAGI is $62,200.
Assume Rita’s consulting business generated $15,550 in grossincome. (Leave no answer blank. Enter zero ifapplicable.)
a. What would Rita’s home office deduction be if her businessgenerated $10,550 of gross income instead of $15,550? (Answer forboth the actual expense method and thesimplified method.)
b. Given the original facts, what is Rita’s AGI for theyear?
