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Kelly Owns a Condo in Wisconsin. During the year, Kelly uses the condo a total of...

Kelly Owns a Condo in Wisconsin. During the year, Kelly uses the condo a total of 25 days. The condo is also rented out for a total of 75 days and generates rental income of $14,000. Kelly incurs the following expenses:

Mortgage Interest: $5000
Property Taxes: $2400
Utilities: $2000
Insurance: $1000
Depreciation: $10500

Using the IRS method of allocating expenses, the amount of depreciation that Tamara may take with respect to the rental property will be:

A) $1050
B) $5074
C) $6200
D) $10500

Solutions

Expert Solution

Item For AGI From AGI
Mortgage Interest (5000 x 75%, 25%)              3,750         1,250
Property taxes (2400 x 75%, 25%)              1,800             600
Utilities (2000 x 75%              1,500
Insurance (1000 x 75%)                  750
Depreciation (10500 x 75%, but limited to income available)              6,200
Total Deductions $        14,000 $     1,850
Since income available after all expenses except depreciation is only 6200, and 75% of 10500 is 7875
So depreciation should be limited to 6200 only.
Option C is correct

ekkarill92 answered 1 year ago
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