Question 1

A taxpayer owns a vacation home. They rent it out for 100 days and use it personally for 20 days. Gross rental income is $10,000. Expenses are: Mortgage Interest/Taxes ($4,000 allocated to rental), Operating Expenses ($8,000 allocated to rental). What is the deductible loss?

Accepted Answer

Test: Personal use > 14 days or 10% rental days? Yes (20 > 10). Result: Deductions limited to rental income. Carryforward allowed, but current loss is $0.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Treating it as a pure rental property because it was rented for 100 days.

A taxpayer owns a vacation home. They rent it out for 100 days and use it personally for 20 days. Gross rental income is $10,000. Expenses are: Mortgage Interest/Taxes ($4,000 allocated to rental), Operating Expenses ($8,000 allocated to rental). What is the deductible loss?

How to approach this question

Full Answer

Common mistakes

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