Question

13. Explain what a qualified residence is for purposes of qualified residence interest.

A. For any taxable​ year, a taxpayer may have a maximum of three qualified​ residences: the​ taxpayer's principal​ residence, and two other residences selected by the taxpayer which the taxpayer personally uses more than the greater​ of: 14 days or​ 10% of the rental days during the year. Qualified residence interest may be deducted for all qualified residences.

B. For any taxable​ year, a taxpayer may have two qualified​ residences: the​ taxpayer's principal​ residence, and one other residence selected by the taxpayer which the taxpayer personally uses more than the greater​ of 14 days or​ 10% of the rental days during the year. If the residence has not been rented by the taxpayer during the​ year, it may be selected by the taxpayer as the second residence with respect to which qualified residence interest may be deducted even though the taxpayer does not meet the​ 14-day or​ 10% test.

C. The​ taxpayer's principal residence is the only qualified resident whose interest is deductible on Schedule A.

D. A qualified residence is the​ taxpayer's principal residence that has been occupied by the taxpayer for a minimum of five consecutive years. Qualified residence interest may only be deducted after the five year period.

Answer 1

The correct answer is B.

A qualified residence is defined as a house, cooperative apartment, condominium, house trailer, or a boat, provided it includes the basic living accommodations, including sleeping space, toilet and cooking facilities. A qualified residence includes a taxpayer's principal residence or second home. The taxpayer's second residence may be unoccupied, partially occupied, or rented to another party. If the second residence is rented, it will be subject to the personal use requirements relating to vacation homes. It will qualify as a personal residence if used by the taxpayer more than the greater of 14 days, or 10% of the number of days during the year that it was rented at fair value. If the taxpayer did not rent the residence at any time during the year, it will be considered a qualified residence.