Question

13. Which of the following statements does not apply to a vacation home that is rented out for less than 15 days during the year?

a. None of the rental income is reported

b. Expenses must be divided between personal use and rental use

c. Real estate taxes are treated as an itemized deduction

d. Casualty losses are only deductible if the taxpayer itemizes deductions

e. All of the above apply

14. A single taxpayer has $130,000 of AGI before considering a $40,000 loss from rental real estate activities in which he actively participates. What amount of loss can the taxpayer deduct?

a. $0

b. $10,000

c. $15,000

d. $30,000

e. None of the above

      $25,000 - [($130,000 - ? ) x 50%] = ?.

15. Which of the following accommodations must be present before property can be considered a dwelling unit?

a. A kitchen

b. Sleeping quarters

c. Toilet facilities

d. All of the above must be present in order to provide the basic living accommodations

e. None of the above must be present in order to provide the basic living accommodations

17.  The maximum number of days a dwelling unit can be rented out during the year before the taxpayer has to worry about the rental income possibly becoming taxable is ____________.

18.  Dividends, interest, royalties, and gains from the sale of securities are examples of____________ income.

19. Single taxpayers who actively participate in rental real estate activities can deduct a maximum of ____________ of their passive losses from active and portfolio income.

Answer 1

1. If the home is your main home and you rent it out for fewer than 15 days during the year, you don’t need to report income. However, you can’t deduct expenses associated with the rental. You can, however, claim the usual homeowner deductions for:

• Mortgage interest
• Real-estate taxes
• Casualty losses

2. Individuals may offset up to $25,000 ($50,000 if married filing jointly) of ordinary income with losses from rental real estate activities. This exemption is reduced (but not below zero) by 50% of the amount by which the adjusted gross income of the taxpayer for the year exceeds $100,000.

• Therefore, $25,000 – (($130,000 – $100,000) × 0.50) = $10,000 deduction allowed.

3. The maximum number of days a dwelling unit can be rented out during the year before the taxpayer has to worry about the rental income possibly becoming taxable is 14 days.

4. Dividends, interest, royalties, and gains from the sale of securities are examples of Passive income.

5. Single taxpayers who actively participate in rental real estate activities can deduct a maximum of $25000 of their passive losses from active and portfolio income.

If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that’s disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing the passive activity loss. Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception.

If you’re married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance can’t be more than $12,500. If you lived with your spouse at any time during the year and are filing a separate return, you can’t use the special allowance to reduce your nonpassive income or tax on nonpassive income.