
Explain the manner in which the answer to problem 48 will change if Person A rented the house for 87 days and used it personally for 13 days.

Explanation of Solution
Personal/Rental use: “If the residence is rented for 15 days or more during a year and if it is used for personal purposes for more than the greater of (1) 14 days or (2) 10 % of the total days rented then the residence is considered as a personal/rental use residence”.
Calculate the amount of net income:
Rental | Personal | ||
Percentage for use | 87% | 13% | |
Gross income | $7,000 | $0 | |
Expenses: | |||
Interest and taxes | (1)$10,005 | (4)$1,495 | |
Utilities and repairs | (2)$2,958 | (5)$442 | |
(3)$6,525 | (6)$975 | ||
Total expenses | $19,488 | $2,914 | |
Net income (loss) | ($12,488) | $0 |
Table (1)
Person A used it for fewer than 15 days; therefore it is categorized as rental property Person A can deduct $325
“The roof replacement of $12,000 is a capital expenditure and the related depreciation is comprised in the depreciation of $7,500”.
Working notes:
(1) Calculate the amount of interest and taxes allocated for rental:
(2) Calculate the amount of utilities and expenses allocated for rental:
(3) Calculate depreciation expense for rental:
(4) Calculate the amount of interest and taxes allocated for personal:
(5) Calculate the amount of utilities and expenses allocated for personal
(6) Calculate depreciation expense for personal:
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Chapter 6 Solutions
South-western Federal Taxation 2018: Individual Income Taxes
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