Ch 8 outline

Ch 8 outline - o PRIMARILY PERSONAL USE No rental income is...

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CH 8 – RENTAL PROPERTY, ROYALTIES, AND INCOME FROM FLOW-THROUGH ENTITIES These income and expenses are for the productions of income property RENTAL PROPERTY o Rental Expenses Any expense that meets the ordinary (customary and usual) and necessary criteria Advertising, repair and maintenance, mgt fees, dep. RENTAL OF VACATION HOMES o Primarily rental : not used for more than 14 days for personal use and rented for 15 days or more o Primarily personal : rented for less than 15 days o Mixed use : rented for 15 days or more and personal use is more than 14 days or 10% of total rental days o Personal use of a dwelling is any use by the taxpayer, family, or nonfamily free of charge o Any day spent repairing/ maintaining does not count as personal use day o PRIMARILY RENTAL USE Expenses must be allocated between personal and rental use Pers. use exp not deductible unless normally allowed as itemized deductions Loss? deductible to the extent allowed by passive activity loss rules
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Unformatted text preview: o PRIMARILY PERSONAL USE No rental income is included in gross income No deduction is allowed for expenses unless normally itemized o MIXED USE No net loss allowed o Allocation of Rental Expenses IRS method: allocate based on ratio of number of rental days to total days used Tax Court Method: taxes and interest allocated based on ratio of rental days to 365 FLOW-THROUGH ENTITIES o Not taxed directly o Income flows through to partners, owners, etc o Passive income o Reported on informational returns o Partnership income or loss passive activities Active (work) Passive (investments) Portfolio (rental or flow through) Can deduct passive losses to the extent of passive income (no net loss allowed) Excess losses cannot offset active or portfolio, but carry forward to future years...
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This note was uploaded on 03/30/2012 for the course ACCT 3221 taught by Professor Armentor during the Spring '08 term at LSU.

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Ch 8 outline - o PRIMARILY PERSONAL USE No rental income is...

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