Required information Problem 14-60 (LO 14-5) The following information applies t

Question

Required information Problem 14-60 (LO 14-5) The following information applies to the questions displayed below.] Dillon rented his personal residence at Lake Tahoe for 14 days while he was vacationing in Ireland. He resided in the home for the remainder of the year. Rental income from the property was $6,500. Expenses associated with use of the home for the entire year were as follows: Real property taxes Mortgage interest Repairs Insurance Utilities Depreciation $ 3,100 12,000 1,500 1,500 3,900 13,000 Problem 14-60 Part a a. What effect does the rental have on Dillon's AGI? Effect of rental activity on Dillon's AGI

Explanation / Answer

SOLUTION

(A) Since Dillon resided in his home for at least 15 days during the year and rented the home for fewer than 15 days, he excludes the rental income from taxable income and does not deduct the associated rental expenses. So, the rental has no effect on Dillon’s AGI.

(B) He will be allowed to deduct the real property taxes of $3,100 and mortgage interest of $12,000 as itemized deductions.

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