1. Mary Beth is a CPA, devoting 3,000 hours per year to her practice. She also owns an office building in
which she rents out space to tenants. She devotes none of her time to the management of the office building.
She has a property management firm make all management decisions for her. During 2020, she incurred a
loss, for tax purposes, of $30,000 on the office building. How must Mary Beth treat this loss on her 2020 tax
2. In 2020, Joan Cannon incurred the following expenses relating to her vacation home:
During 2020, Joan personally used the vacation home for 20 days. Determine the rental expense deduction
that she is entitled to claim on her 2020 tax return in each of the following cases. Use the Tax Court method of
allocating normal expenses allowable to all taxpayers.
Joan rents out the vacation home for 10 days during the year and receives $800 in rental income.