[The following information applies to the questions displayed below.] Natalie ow

Question

[The following information applies to the questions displayed below.]

Natalie owns a condominium near Cocoa Beach in Florida. This year (2015), she incurs the following expenses in connection with her condo:

  Insurance

$1,000

  Advertising expense

500

  Mortgage interest

3,500

  Property taxes

900

  Repairs & maintenance

650

  Utilities

950

  Depreciation

8,500

During the year, Natalie rented out the condo for 75 days, receiving $10,000 of gross income. She personally used the condo for 35 days during her vacation.

Assume Natalie uses the IRS method of allocating expenses to rental use of the property. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)

a.

What is the total amount of for AGI (rental) deductions Natalie may deduct in the current year related to the condo?

b.

What is the total amount of itemized deductions Natalie may deduct in the current year related to the condo?

      

c.

If Natalie’s basis in the condo at the beginning of the year was $150,000, what is her basis in the condo at the end of the year?

      

d.

Assume that gross rental revenue was $2,000 (rather than $10,000). What amount of for AGI deductions may Natalie deduct in the current year related to the condo?

      

[The following information applies to the questions displayed below.]

Natalie owns a condominium near Cocoa Beach in Florida. This year (2015), she incurs the following expenses in connection with her condo:

Explanation / Answer

Answer 1

Total “For AGI” deductions ($3500 + $1330 + $5170) => 10000

Answer 2

Total amount of itemized deductions

Mortgage interest [(35/110) × $3,500] => 1114

Real property taxes [(35/110) × $900] => 286

Total “from AGI” deductions => 1400

Answer 3

Begg. basis => 150000

- dep => 5170

Adjusted basis => 144830

Answer 4

$3,500

Even though it creates a loss (2000 - 3500), Natalie is allowed to deduct all of the advertising expense and the portion of the mortgage interest expense and real property taxes allocated to the rental use of the home as for AGI deductions (these deductions are not limited to rental revenue)

Gross Rental Incoem 10000 Tier 1 expense Advertising Expense => 500 Mortgage Interest (75 /110) * 3500 => 2386 Property taxex =>( 75 /110) * 900 => 614 Less: Total Tier 1 Expenses 3500 Balance 6500 Tier 2 expenses Insurance => (75/110) × 1000=> 682 Utilities => (75/110) × 950 => 648 Less:total Tier 2 expenses 1330 Balance 5170 Tier 3 expenses Depreciation => 75 /110 * 8500 => 5795,  but the deductionis limited to the remaining income 5170 BALANCE 0

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