During 2015, Larry rented his vacation home for 200 days and lived in it for 20

Question

During 2015, Larry rented his vacation home for 200 days and lived in it for 20 days. During the remaining days of the year, the vacation home was available for rental use. The rental revenue totaled $20,000. Expenses associated with the vacation home for 2015 are as follows:

               Mortgage interest                              $11,000

               Property taxes                                        3,500

               Utilities                                                  1,800

               Maintenance and repairs                      2,000

               Depreciation                                          6,000

               Insurance                                               1,500

Determine the effect of these income and expense items on Larry’s 2015 tax return. If the vacation home is personal/rental use, perform the calculations twice, first using the court’s approach and second using the IRS’s approach. [When calculating percentages, round to the nearest tenth of a percent.]

Explanation / Answer

IF THE VACTION HOME IS RENTED FOR 15 DAYS OR MORE THE HOME WILL BE CONSIDERED AS RENTAL PROPERTY.

SO HERE IN THE ABOVE CASE LARRY RENTED HIS VACTION HOME FOR 200 DAYS WHICH IS MORE THAN 14 DAYS, SO IT WILL BE CONSIDERED AS A RENTAL PROPERTY AND TAXED AS FOLLWS.

PARTICULLAR AMOUNT $ RENTAL REVENUE 20000 LESS MORTGAGE INTEREST ($11000 / 220DAYS) * 200DAYS (10000) LESS PROPERTY TAX ($3500 /220 DAYS) * 200DAYS (3182) LESS UTILITES ($1800 /220 DAYS) * 200DAYS (1636) LESS MAINATANCE & REPAIRS ($2000 /220 DAYS) * 200DAYS (182) LESS DEPRICIATION ($6000 * 50%) (3000) LESS INSURANCE ($1500 /220 DAYS) * 200DAYS (1364) INCOME TO BE INCLUDED IN 2015 TAX RETURN 636

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