Question

Alexa owns a condo near Cocoa Beach in Flordia. This year, she incurs the following expenses in connection with her condo:

Insurance $3,500

Mortage interest $10,800

Property Taxes $3,700

Repairs and maintance $1,150

Ulitites $2,900

Depreciation $22,000

During the year, Alexa rented out the condo for 132 days. Alexa's AGI from all sources other than the rental properrty is $200,000. Unless otherwise specifies, Alexa has no sources of passive income.

Assume that in addition to renting the condo for 132 days, Alexa uses the condo for 8 days of personal use. Also assume that Alexa receives $44,500 of gross rental receipts and her itemized deductions exceed the standard deduction before considering expenses associated with the condo. Answer the following questions:

A) What is the total amount of for AGi deductions relating to the condo that Alexa may deduct in the current year? Assume shes uses the IRS method of allocating expenses between rental and personal days.

Gross rental income

Expenses:

Insurace

Mortage Interest

Property Taxes

Repairs and Maintenance

Utilities

Depreciation

Total Expenses

Balance-net rental income

Total for AGI deductions

B) What is the total amount of for AGI deductions relating to the condo that Alexa may deduct in the current year? Assume she uses the IRS method of allocating expenses between rental and personal days.

Answer 1

Answer :

Given that :

Insurance = $3,500

Mortgage interest = $10,800

Property Taxes = $3,700

Repairs and maintenance = $1,150

Utilitites = $2,900

Depreciation = $22,000

a)Costs reduce AGI by $ 44,050 . Alexa's property is treated as a no living arrangement with rental use property since she leased it for 100 days and did not utilize it just for individual purposes.The rental derivations are completely deductable for AGI. Therefore the costs diminish Alexa's AGI by $ $ 44,050 and the gross rental salary expands the AGI by $ 44,500.Overall Alexa's AGI will be expanded by rental total compensation of $ 450. Calculated as pursues :

Particulars	Amount	Total cost
Gross rental income		44,500
Insurance	- $ 3,500
Less: Mortgage interest	-$10,800
Less : Property Taxes	- $3,700
Less : Repairs and maintenance	- $1,150
Less : Utilitites	- $2,900
Less : Depreciation	- $22,000
Total expenses	= - $ 3,500 -$10,800 - $3,700 - $1,150 - $2,900 - $22,000 = - $ 44,050	- $ 44,050
Remaining balance rental income		= $ 44,500 - $ 44,050 = $ 450

Net income = $ 450

b)Since Alexa did not utilize the investment property for individual purposes all costs related with the property were distributed to rental use and were deducted for AGI. Thus,the costs related with the property have no impact on her ordered derivations.