Question

Jerry owns a condo at a ski resort. He places the condo in a rental pool managed by the resort when he and his family are not using it. During 2019 they reported the following:

Personal use days……………………………….62

Rental days……………………………...……….34

Rental income……………………………………7,600

Property taxes………………………………..…..9,800

Mortgage interest………………………………...5,600

Utilities and maintenance………………...……..3,600

Using the Bolton allocation, what is reported…

	Schedule E	Schedule A	Totals
Rental income
Property tax
Mortgage interest
Utilities and maintenance

Answer 1

Under the Bolton approach first we have to see whether the expenses are allocated to rental or personal use.If the tax payer uses the vacation home for more than 14 days or 10 percent of the number of days the property is actually rented out whichever is greater,then that property is treated as a residential property.Here the property has been used for 62 days and rented for 34 days which means this property qualifies to be a property of personal use and deductions are restricted as explained below:

Under the Bolton approach expenses such as interest,taxes accrue daily regardless of the use and so it has been allocated on the basis of 365 days.Expenses allocated towards the rental period is deductible in schedule E whereas remaining in schedule A.Also full deduction will be available.

UItilties amounted to 3600 * 34/(34+62) = 1275.However this will not be allowed because the deduction is limited to the rental income available.Rental income available of 7600 has ben already exhausted so utility deduction will not be available

	Schedule E	Schedule A	Total
Rental Income	7600	0	7600
Property Tax	9800 * 34/365 =912.87	=9800-912.87 =8887.13	9800
Mortgage Interest	=5600 * 34/365 =521.64	=5600-521.64 =5078.36	5600
Utilities and maintenance	0 - Not Deductible	0 - Not Deductible	3600