Tina owns a condominium in Santa Barbara. During the current year, she incurs th
ID: 2462401 • Letter: T
Question
Tina owns a condominium in Santa Barbara. During the current year, she incurs the following expenses related to the property:
Mortgage interest $10,000
Property taxes 1,800
Utilities 800
Maintenance fees 1,000
Repairs 600
Depreciation 6,000
a. For each of the following scenarios, indicate whether Tina would treat the condo for income tax purposes as personal use property, a rental, or a vacation home.
Case
Rental Income
Rental Days
Personal-use
Days
Is the classification:
Personal, Rental, or Vacation home?
A
$12,000
300
0
B
$9,000
40
10
C
$9,000
40
20
D
$2,000
12
48
E
$11,000
280
20
b. Consider Case B. What is the current deduction for adjusted gross income? If any expenses aren't deductible for AGI, explain why not and what happens to them.
Case
Rental Income
Rental Days
Personal-use
Days
Is the classification:
Personal, Rental, or Vacation home?
A
$12,000
300
0
B
$9,000
40
10
C
$9,000
40
20
D
$2,000
12
48
E
$11,000
280
20
Explanation / Answer
The rule for Personal, rental or vacation home is as follows Rental period Vacation home < 15 days Personal home > 14 days > 14 days - or 10% of rental days Rental home > 14 days < 14 days or 10% of rental days a) Based on the above, classification is as under Rental Days Personal use days classification Case A 300 0 Rental Case B 40 10 Rental Case C 40 20 Personal Case D 12 48 Vacation home Case E 280 20 Rental b) Mortgage Interest 10000 property taxes 1800 Utilities 800 Maintenance fees 1000 Repairs 600 Depriciation 6000 Total expenses 20200 % of expenses deductible for Case B = 40 /(40 + 10) = 80% Hence expenses deductible = 20200 *80% = 16160Related Questions
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