Problem 3-A

Problem 3-A - Prob Set 3 1. Tom owns a vacation home in...

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Prob Set 3 1. Tom owns a vacation home in Oregon which he uses personally for 30 days during the year. He also rents the home out for ten days for $1,000. His expenses allocated to the rental days are $300 of mortgage interest and property taxes, $275 of maintenance costs, and $400 of depreciation. How is this treated for tax purposes? Ans: Since it was rented out for less than 15 days, the rental income is not taxed. But none of the expenses can be claimed (except for the property taxes and mortgage interest, which are generally taken on personal homes). 2. Moe owns a vacation home in Montana which he uses personally for 15 days during the year. He also rents the home out for 45 days for $1,500. His expenses allocated to the rental days are $400 of mortgage interest and property taxes, $475 of maintenance costs, and $1,000 of depreciation. How is this treated for tax purposes? Ans: The rental activity results in a loss here because the total expenses exceed the rent by $375 ($1,875 - $1,500). BUT, the loss cannot be claimed since the personal use of the home (15 days) is more than the greater of (a) 14, and (b) 10% of rental days (4.5). Since 15 is more than 14, the loss cannot be taken.
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This note was uploaded on 09/30/2011 for the course ECO 373 taught by Professor Qq during the Spring '11 term at CUNY Hunter.

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Problem 3-A - Prob Set 3 1. Tom owns a vacation home in...

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