Question 1

A taxpayer owns a vacation home used 30 days for personal use and rented for 100 days. Rental income is $10,000. Expenses are: Mortgage Interest/Taxes $4,000; Utilities/Maintenance $8,000; Depreciation $5,000. What is the deductible loss?

Accepted Answer

Vacation Home Rules: 1. Personal Use (30) > Greater of 14 or 10% of Rental (10). 2. Classified as Residence. 3. Expenses limited to Income. 4. Cannot generate a loss.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Deducting the loss; misclassifying as rental property.

A taxpayer owns a vacation home used 30 days for personal use and rented for 100 days. Rental income is $10,000. Expenses are: Mortgage Interest/Taxes $4,000; Utilities/Maintenance $8,000; Depreciation $5,000. What is the deductible loss?

How to approach this question

Full Answer

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Practice the full CPA TCP Practice Exam 5

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