Question

3. This question is worth 10 points During the year, Evan rented his vacation home for 60 days and spent 90 days there. Gross rental income from the property was $3,000. Even incurred the following expenses: mortgage interest, $2,000; real estate taxes. $2,500; utilities, $1,000; maintenance, $300; and depreciation, $5,000. (a). Identify how this vacation home is treated the type (personal, rental, personal/rental), and how you came to your conclusion (state the rule and apply the facts to the rule) (b). Compute Evan's allowable rental deductions for the vacation home using the Courts approach, rounding to the nearest dollar. Your answer MUST follow the format used in Chapter 6, Examples 35 through 39 in your text. (C). Are rental expenses Deductions FOR AGI or FROM AGI? (d). Which personal expenses that are listed in this problem, if any, are deductible and how much may be deducted (show your calculation)? (e) How are the personal expenses classified: FOR AGF or FROM AGI? (1) What tax schedule are the personal expenses listed in this problem reported on? (). Using the information from this problem, prepare 2018 Schedule E (of Form 1040), page 1. NOTE: The answers to this problem should be set up as follows. (a) -- (b)--- and so on. You do NOT have to repeat the questions, please just provide the answers () is answered on a separate sheet and should be tached AFTER the answers to parts (a) through

Answer 1

Solution:

a. As per internal revenue services, if a property is let out (rented) for more than 15 days, then you need to report the income in schedules.

A house is considered to be self occupied,if you use it for personal purpose for a period more than,

• 14 Days or
• 10% of the total number of days you rent the home at fair rental value

Whichever is Greater

According to this rule, since evan's rented his vacation home for more than 14 days, he need to report this rental income. He can claim certain expense for the period it is treated as rented. And it is personal use is 90 days.

b.

Computation of allowable rental deductions for the vacation home will apportioned on the basis of the days

The total days = 60+90=150 days

Mortgage interest =

2000 150.X60 = 800

Real estate taxes =

2500 150 760 = 1000

Utilities =

1000 150.X60 = 400

Maintenance =

300 150X60 = 120

Depreciation =

5000 150 c = 2000

Total = 800+1000+400+120+2000= $4320

Gross Rental Income (A)	$ 3000
Less: Rental portion of mortgage interest (a)	$ 800
Less: Rental portion of real estate taxes (b)	$ 1000
Less: Rental portion of utilities (c)	$ 400
Less: Rental portion of maintenance (d)	$ 120
Less: Depreciation for the rental portion (e)	$ 2000
Total (B)= a+b+c+d+e	$4320
Amount of expense to be carried forward (C) = B-A	$1320

Note:

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