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Guthrie's adjusted basis in the home

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Guthrie purchased his home for $300,000. As a sole proprietor, he operates a certified public accounting practice in his home. For this business, he uses one room exclusively and regularly as a home office. In Year 1, $1,450 of depreciation expense on the home office was deducted on his income tax return. In Year 2, Guthrie sustained losses in his business; therefore, no depreciation was taken on the home office. Had he been allowed to deduct depreciation expense, his depreciation expense would have been $1,700. What is the adjusted basis in the home?

a. $295,000.

b. $296,850.

c. $298,550.

d. $300,000.

e. None of the above.

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Answer: B

Generally, expenses related to the rent, purchase, maintenance and repair of a personal residence may not be deducted as a business expense. However, taxpayers who use a portion of their home for business purposes may be able to take a home office deduction if they meet certain ...

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