Question

uring the year, Anna rented her vacation home for 30 days, used it personally for 20 days, and left it vacant for 315 days. She had the following income and expenses: Rent income $7,000 Expenses Real estate taxes 2,500 Interest on mortgage 9,000 Utilities 2,400 Repairs 1,000 Roof replacement (a capital expenditure) 12,000 Depreciation $7,500 If an answer is zero, enter "0". Assume a 365-day year. In your computations round any fractions to four decimal places. Round your final answer to the nearest dollar. a. Compute Anna's net rent income or loss and the amounts she can itemize on her tax return, using the court's approach to allocating property taxes and interest. In the table below, if an expense is an itemized deduction select "Yes", otherwise select "No". Real property taxes Yes Utilities No Repairs No Depreciation No Roof replacement No Mortgage interest Yes Anna has itemize deductions of $ . Compute Anna's taxable net rent income or deductible rental loss. $ b. How would your answer in part (a) differ using the IRS's method of allocating property taxes and interest? Anna has $ 4,600 of itemize deductions related to these expenses and her taxable net rent income or deductible rental loss is $ 0 . the first answers i am getting wrong the last is correct the 4600 deductions and 0 income

Answer 1

Summary of days:

Rented Days	30
Days Used Personally	20
Days Vacant	315

Part - A :

A (1). Computation of Net Rent Income / (Loss) using Court's Approach:

Particulars	Amount (in $)
Rent Income	7,000.0000
Less: Real Estate Taxes (2,500*30/365)	205.4795
Less: Interest on Mortgage (9,000*30/365)	739.7260
Balance	6,065.7945
Less: Utlities (2,400*30/50)	1,440.0000
Less: Repairs (1,000*30/50)	600.0000
Balance	4,025.7945

Less: Depreciation (7,500*30/50) but limited to 4,025.7945	4,025.7945
Net Rent Income / (Loss)	0

A (2). Calculation of itemized deduction:

Particulars	Amount (in $)
Real Estate Taxes	2,500.0000
Interest on Mortgage	9,000.0000
Less : Amount already deducted as expense (205.4795 + 739.7260)	945.2055
Amount of Itemized Deduction	10,554.7945

Part - B :

B (1). Computation of Net Rent Income / (Loss) using IRS Approach:

Particulars	Amount (in $)
Rent Income	7,000.0000
Less: Real Estate Taxes (2,500*30/50)	1,500.0000
Less: Interest on Mortgage (9,000*30/50)	5,400.0000
Balance	100.0000
Less: Utlities (2,400*30/50)	1,440.0000
Less: Repairs (1,000*30/50)	600.0000
Balance	(1,940.0000)

Less: Depreciation (7,500*30/50) **	0
Net Rent Income / (Loss) ***	(1,940.0000)

B (2). Calculation of itemized deduction:

Particulars	Amount (in $)
Real Estate Taxes	2,500.0000
Interest on Mortgage	9,000.0000
Less : Amount already deducted as expense (1500 + 5400)	6,900.0000
Amount of Itemized Deduction	4,600.0000

** Depreciation of $4,500 will be carried forward to the next year as Unused Depreciation.

*** Net Rent Loss of $1,940 using IRS approach will be carried forward to the next year.