ExpertMedium1 markMultiple Choice
CPA · Question 48 · Area I: Individual Compliance and Planning
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?
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?
Answer options:
A.
$2,000 loss.
B.
$0
C.
$8,000 loss.
D.
$6,000 loss.
How to approach this question
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.
Full Answer
B.$0✓ Correct
$0
IRC §280A. Because personal use exceeds the greater of 14 days or 10% of rental days, the property is considered a residence. Rental expenses are deductible only to the extent of rental income. Loss is not allowed.
Common mistakes
Treating it as a pure rental property because it was rented for 100 days.
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