Question

During 2019​, Kim incurs the following expenses with respect to her beachfront condominium in​ Hawaii.

Expense Item Amount

Insurance $500

Repairs and maintenance 700

Interest on mortgage 3,000

Property taxes 1,000

Utilities 800

Depreciation 8,000

During 2019​, Kim used the condominium 20 days for vacation. She rented it out for a total of 60 ​days, generating a total gross income of $9,100.

.Requirement a. What are the total amounts of deductions for and from AGI that Kim may take during 2019 with respect to the condominium using the IRS allocation​ method?​ (For purposes of this​ problem, use the allocation formula set forth by Sec. 280A. Enter​ "0 for zero​ amounts.)

Item	For AGI	From AGI
Insurance
Repairs and maintenance
Interest on mortgage
Property taxes
Utilities
Depreciation
Total deductions

Answer 1

Based on the information available in the question, we can answer as follows:-

Particulars	For AGI	From AGI
Insurance	375
Repairs and Maintenance	525
Interest on Mortgage	2,250	750
Property taxes	750	250
Utilities	600	200
Depreciation	4,600
Total	9,100	1,200

Under IRS method, the expenses are allocated based on the following:-

Rental Use expenses = Number of days/rented/Total number of days used * Total expense for the year.

The rental use expenses are generally the deductions to arrive at the AGI while the others are deductions from AGI.

1.) Insurance - $500

For AGI - $500 * 60 days/80 days - $375

2.) Repairs and Maintenance - $700

For AGI - $700 * 60 days/80 days - $600

3.) Interest on Mortgage - $3,000

For AGI - $3,000 * 60 days/80 days - $2,250

From AGI - $750

4.) Property taxes - $1,000

For AGI - $1,000 * 60 days/80 days - $750

From AGI - $250

5.) Utilities - $800

For AGI - $800 * 60 days/80 days = $600

From AGI - $200

6.) Depreciation - $8,000

For AGI - $8,000 * 60 days/80 days = $6,000

However, the depreciation expense is limited to the remaining amount of income, $4,600 after the deduction of Insurance, Repairs and Maintenance, Interest on Mortgage, Property taxes and Utilities.

The remaining portion $1,400 ($6,000 - $4,600) is carried over to the next year.

Please let me know if you have any questions via comments and all the best :) !