Question

1) Donald rents out his vacation home for nine months and lives in his vacation home for the remainder of the year. His gross rental income for 2017 is $7,200. The expenses attributable to the vacation home for the entire year are as follows:

Real estate taxes $2,000

INterest on mortgage loan 4,000

Utilities 1,200

Repairs/maintenance 600

Depreciation 3,500

What amount would Donald report as net income or loss from the rental of the vacation home?

2) Wilson and Joan, both in their 30s, file a joint income tax return for 2017. Wilson's wages are $15,000 and Joan's wages are $23,000 for the year. Their total adjusted gross income is $38,000, and Joan is covered by a qualified pension plan at work but Wilson is not.

a) What is the maximum amount that Wilson and Joan may each deduct for contributions to thier individual retirement accounts?

Wilson $

Joan $

b) If Joan's wages are $82,000 for 2017, instead of $23,000, and thier adjusted gross income is $97,000, what is the maximum amount that Wilson and Joan may each deduct for contributions to thier individual retirement accounts?

Wilson $

Joan $

3) Hope srpings, a teacher, loaned Hugh Owens, a friend, $20,000 to invest in real estate. Hugh declared bankruptcy in 2017 and cannot repay the $20,000

a) What is the nature of Hope's loss? ( what does it called ?)

b) Assuming Hope has no other captial transactions, is there a limit on the amount she may deduct for 2017?

Explain

4) Dennis, the owner of Dennis Company, incurs the following expenses while away from home on a three-week business trip during 2017:

Air fare from Chicago to Boston $800

Hotel charges 2,200

Meal charges 880

Dry cleaning and laundry 100

Local transportation 55

Business entertainment 250

Business gift to Boston manager 55

in addition to the above expenses, Dennis incurred the following expenses for a weekend sightseeing trip to Washington D.C.:

Transportation to Washington DC $350

Hotel charges 225

Meal charges 105

Calcuate the amount Dennis may deduct for 2017 as travel expenses for the trip

Answer 1

Answer 1.

Expenses for the year	$
Real Estate Taxes	2000
Interest on mortgage loan	4000
Utilities	1200
Repairs and maintenance	600
Depreciation	3500
Expesnes Total for the year	11300
	$
Gross Rental Income	7200
Expenses deductible for 9 months	8475
Loss from rental home	-1275

Answer 2

2a.	Wages		Deduction Allowed	Reason
Wilson	15000		5500	modified AGI is less than 186,000
Joans	23000	covered by pension plan at work	5500	modified AGI is less than 99000
	38000		11000
2b.	Wages		Deduction Allowed
Wilson	15000		5500	modified AGI is less than 186,000
Joans	82000	covered by pension plan at work	5500	modified AGI is less than 99000
	97000		11000

Answer 3

3a. The nature of loss is bad debt

3b. If there are no other capital transaction, a maximum of $3000 can be deducted against ordinary income.

Answer 4.

Less than 25% of time is spent on personal sightseeing and the trip is mainly business related. Hence deduction would be available.

However deduction would be allowed only for the business trip related expenses excluding the expenses of personal nature

Air fare	800
Hotel Charges	2200
Meals	880
Dry cleaning	100
Local transport	55
Business entertainment	250
Business gift to Boston manager	55
	4340