What is taxable income for the year?
Amanda who is single ownn a vacation cottage on the lake. During the year, she rented it for $2000 for 14 days, lived in it for 56 days, and left it vacant the remainder of the year. The year's expenses amounted to $5000 interest expense, $800 propetry taxes, $1500 utilities and maintainance, and $2400 depriciation. Using the IRS method of allocating expense and assuming that Amanda has other itemized deductions of $9000 after appropriate limits and AGI of $100,000, What is Amanda's taxable income for the year? a) $87,700 b) $81,900 c) 83,900 d) 85,000 ( IRS METHOD)
Public Comments
- ask your teacher if you can not answer this question.
- This is to much calculating for me to do in my head so I'll help a little bit. The vacation home is going to be used "primarily personal" since you did not rent it for more than fifteen days(if I'm wrong its a fourteen day limitation, in which case its a mixed use home) , and you used it for 56 days. So the income from the home is excludible. However, if its a fourteen day limitation the home is mixed use, and you would need to allocate income, and expenses as business/personal. With the IRS method you calculate interest and taxes based on total days used, in this case 71 days. So the amount of interest and taxes deductible FROM rental income would be 14/56 x 5800. Keep in mind thats only if its a fourteen day limitation. I'm pretty darn sure its a 15 day limitation so most likely this vacation home income is excludible. I would have to look up the number, but I'm to lazy right now. Good luck on your test.
