Question

In: Accounting

manuela began renting her main home at fair market value on May 1, 2008, when she...

manuela began renting her main home at fair market value on May 1, 2008, when she converted the house to rental property the adjusted basis was $205,000 which included $18,000 of value attributable to the land the fair market value at the time of conversion was $195,000 including land value of $10,000 in 2019. manuela received $19,200 in rental income from the property her expenses for the year included yard maintenance $480, repairs $850, property insurance $2,520, mortgage interest $960, reals estate tax $2,750 what is manuels loss on the rental property?

Solutions

Expert Solution

When a personal residence is converted to business use (or for use in the production of income), its starting point for basis for depreciation is the lower of (1) the adjusted basis on the date of conversion, or (2) the property’s fair market value (FMV) at the time of conversion

THe Basis for Deprecition is $185,000 ($195,000-$10,000)

Under MACRS Property converted from residential to rental use must be depreciated using the method and recovery period in effect in the year of conversion The method that applied in the year the property was originally acquired is irrelevant. Thus, a home that is converted from personal to rental use during 2008 is depreciated over 27.5 years (39 years if the rental is not residential) under the modified accelerated cost recovery system

Year Adjusted Basis Rate % Depreciation Cumulative Book Value Method
2008 1,85,000 1.82 3,364 3,364 1,81,636 SL
2009 1,81,636 3.64 6,727 10,091 1,74,909 SL
2010 1,74,909 3.64 6,727 16,818 1,68,182 SL
2011 1,68,182 3.64 6,727 23,545 1,61,455 SL
2012 1,61,455 3.64 6,727 30,273 1,54,727 SL
2013 1,54,727 3.64 6,727 37,000 1,48,000 SL
2014 1,48,000 3.64 6,727 43,727 1,41,273 SL
2015 1,41,273 3.64 6,727 50,455 1,34,545 SL
2016 1,34,545 3.64 6,727 57,182 1,27,818 SL
2017 1,27,818 3.64 6,727 63,909 1,21,091 SL
2018 1,21,091 3.64 6,727 70,636 1,14,364 SL
2019 1,14,364 3.64 6,727 77,364 1,07,636 SL
2020 1,07,636 3.64 6,727 84,091 1,00,909 SL
2021 1,00,909 3.64 6,727 90,818 94,182 SL
2022 94,182 3.64 6,727 97,545 87,455 SL
2023 87,455 3.64 6,727 1,04,273 80,727 SL
2024 80,727 3.64 6,727 1,11,000 74,000 SL
2025 74,000 3.64 6,727 1,17,727 67,273 SL
2026 67,273 3.64 6,727 1,24,455 60,545 SL
2027 60,545 3.64 6,727 1,31,182 53,818 SL
2028 53,818 3.64 6,727 1,37,909 47,091 SL
2029 47,091 3.64 6,727 1,44,636 40,364 SL
2030 40,364 3.64 6,727 1,51,364 33,636 SL
2031 33,636 3.64 6,727 1,58,091 26,909 SL
2032 26,909 3.64 6,727 1,64,818 20,182 SL
2033 20,182 3.64 6,727 1,71,545 13,455 SL
2034 13,455 3.64 6,727 1,78,273 6,727 SL
2035 6,727 3.64 6,727 1,85,000 0 SL

The Depreciation is 6727 for 2019

Gain/ Loss from Rental Property is as follows:

2019
Income $19,200
Yard ($480)
Repair ($850)
Insurance ($2520)
Mortagae ($960)
Tax ($2750)
Depreciation ($6727)
Gain/(Loss) $4,913

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Juliana purchased land three years ago for $50,000. She gave the land to Tom, her brother, in the current year, when the fair market value was $70,000.
Juliana purchased land three years ago for $50,000. She gave the land to Tom, her brother, in the current year, when the fair market value was $70,000. No gift tax is paid on the transfer. Tom subsequently sells the property for $63,000. a. What is Tom’s basis in the land, and what is his realized gain or loss on the sale? b. Assume instead that the land has a fair market value of $45,000 and that Tom sold the land...
Sarah (single) purchased a home on January 1, 2008, for $600,000. She eventually sold the home...
Sarah (single) purchased a home on January 1, 2008, for $600,000. She eventually sold the home for $800,000. What amount of the $200,000 gain on the sale does Sarah recognize in each of the following alternative situations? (Assume accumulated depreciation on the home is $0.) b. Sarah used the property as a vacation home through December 31, 2016. She then used the home as her principal residence from January 1, 2017, until she sold it on January 1, 2019. (Round...
Sarah (single) purchased a home on January 1, 2008 for $600,000. She eventually sold the home...
Sarah (single) purchased a home on January 1, 2008 for $600,000. She eventually sold the home for $820,000. Sarah used the property as a vacation home through December 31, 2014. She then used the home as her principal residence from January 1, 2015 until she sold it on January 1, 2018. What amount of the gain on the sale does Sarah recognize?
Sarah (single) purchased a home on January 1, 2008, for $600,000. She eventually sold the home...
Sarah (single) purchased a home on January 1, 2008, for $600,000. She eventually sold the home for $800,000. What amount of the $200,000 gain on the sale does Sarah recognize in each of the following alternative situations? (Assume accumulated depreciation on the home is $0 at the time of the sale.) (Leave no answer blank. Enter zero if applicable.) b. Sarah used the property as a vacation home through December 31, 2016. She then used the home as her principal...
3. Mary goes to the doctor and pays for her visit. When she gets home, she...
3. Mary goes to the doctor and pays for her visit. When she gets home, she must fill out a form and submit it to the insurance company so she can be reimbursed. What type of insurance does she most likely have? A. HMO B. POS C. Indemnity D. The Blues
Julie Brown is in her late 20s. She is renting an apartment in the fashionable part...
Julie Brown is in her late 20s. She is renting an apartment in the fashionable part of town for $1,200 a month. After much thought, she’s seriously considering buying a condominium for $175,000. She intends to put 20 percent down and expects that closing costs will amount to another $5,000; a commercial bank has agreed to lend her money at the fixed rate of 6 percent on a 15-year mortgage. Julie would have to pay an annual condominium owner’s insurance...
1. Create a journal entry for when a Trading Security has increased in fair market value...
1. Create a journal entry for when a Trading Security has increased in fair market value by $150,000. Which financial statements are affected and how are the financial statements affected? 2. Create a journal entry for when a Available-For-Sale Security has decreased in fair market value by $85,000. Which financial statements are affected and how are the financial statements affected? 3. What journal entries are required for when a company is changing their accounting policy from LIFO to FIFO?
When Mary began experiencing paresis and spasticity in her lower extremities, she knew that something was...
When Mary began experiencing paresis and spasticity in her lower extremities, she knew that something was seriously wrong. She was finally diagnosed as having a form of relapsing remitting multiple sclerosis. An MRI performed during one of her more severe “episodes” revealed lesions (lower left) that appeared to improve after three months (lower right). Her neurologist explained that all of her previous episodes could be explained by the underlying cause of this disease. Mary learned that the progression of this...
what is fair market value.
what is fair market value.
Purchasing A Home versus Renting A Space Step 1: Identify a home in your area (or...
Purchasing A Home versus Renting A Space Step 1: Identify a home in your area (or wherever you'd like to live). Step 2: Based on the price of the home, determine how much it would cost you on a monthly basis to purchase that home. Your payment will consist of Principal, Interest, Taxes, and Insurance (PITI). Note: Use current 30-year interest rates; Assume 5%-10% downpayment; The "insurance" in the PITI is not property coverage, it is insurance to protect the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT