Karen and Andy own a beach house. They have an agreement with a rental agent to rent it up to 200 days per year. For the past three years, the agent has been successful in renting it for 200 days. Karen and Andy use the beach house for one week during the summer and one week during Thanksgiving. Their daughter, Sarah, a college student, has asked if she and some friends can use the beach house for the week of spring break. Advise Karen and Andy on how they should respond, and identify any relevant tax issues. If the residence is rented for 100 X days or more in a year and is not used for personal purposes for more than the greater ✓ of 14 days or 10% of the total days rented, the residence is treated as rental property. The expenses must be allocated between personal and rental days if there are any personal use days during the year. In prior years, the beach house has been classified as rental ✔property, since the personal use did not exceed limits outlined above. Thus, if the total available deductions exceeded the rental income, the loss was deducted Andy's tax return. If Sarah is permitted to use the beach house for one week, the total personal use of the beach house exceeds limit. In this case, the deductions are only permitted to the extent of rental income ✔ the on Karen and ✔the statutory
Karen and Andy own a beach house. They have an agreement with a rental agent to rent it up to 200 days per year. For the past three years, the agent has been successful in renting it for 200 days. Karen and Andy use the beach house for one week during the summer and one week during Thanksgiving. Their daughter, Sarah, a college student, has asked if she and some friends can use the beach house for the week of spring break. Advise Karen and Andy on how they should respond, and identify any relevant tax issues. If the residence is rented for 100 X days or more in a year and is not used for personal purposes for more than the greater ✓ of 14 days or 10% of the total days rented, the residence is treated as rental property. The expenses must be allocated between personal and rental days if there are any personal use days during the year. In prior years, the beach house has been classified as rental ✔property, since the personal use did not exceed limits outlined above. Thus, if the total available deductions exceeded the rental income, the loss was deducted Andy's tax return. If Sarah is permitted to use the beach house for one week, the total personal use of the beach house exceeds limit. In this case, the deductions are only permitted to the extent of rental income ✔ the on Karen and ✔the statutory
Chapter6: Deductions And Losses: In General
Section: Chapter Questions
Problem 20DQ
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Transcribed Image Text:Karen and Andy own a beach house. They have an agreement with a rental agent to rent it up to 200 days per year. For the past three
years, the agent has been successful in renting it for 200 days. Karen and Andy use the beach house for one week during the summer and
one week during Thanksgiving. Their daughter, Sarah, a college student, has asked if she and some friends can use the beach house for
the week of spring break. Advise Karen and Andy on how they should respond, and identify any relevant tax issues.
If the residence is rented for
100 X days or more in a year and is not used for personal purposes for more than the
greater
14 days or
10 % of the total days rented, the residence is treated as rental
property. The expenses must be allocated between personal and rental days if there are any personal use days during the year.
In prior years, the beach house has been classified as rental
property, since the personal use did not exceed
limits outlined above. Thus, if the total available deductions exceeded the rental income, the loss was deducted
Andy's tax return.
of
If Sarah is permitted to use the beach house for one week, the total personal use of the beach house exceeds
limit. In this case, the deductions are only permitted to the extent of rental income
the
on Karen and
the statutory
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