9. May owns a four-plex in Garden Grove, CA. She rents out 3 units and lives in

Question

9. May owns a four-plex in Garden Grove, CA. She rents out 3 units and lives in the fourth. Her income and expenses for the entire four-plex are as follows: mortgage interest $8,200, property taxes $9,000, insurance $3,000, utilities $2,000, repairs and maintenance $1,000, depreciation on the entire complex of $5,000, and rental income of $25,000. What amount of net rental income or loss should May report on her current tax return?

a) $3,200 net loss

b) $3,850 net income

c) $21,150 net loss

d) $25,000 net income

Explanation / Answer

Answer: b) $3,850 net income

$25,000 - 3/4 ($8,200+$9,000+$3,000+$2,000+$1,000+$5,000) = $3,850

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