Question

Alexa owns a condominium near Cocoa Beach in Florida. This year, she incurs the following expenses in connection with her condo:

Insurance	$	1,800
Mortgage interest		7,400
Property taxes		4,350
Repairs & maintenance		730
Utilities		2,400
Depreciation		18,600

During the year, Alexa rented out the condo for 127 days. Alexa’s AGI from all sources other than the rental property is $200,000. Unless otherwise specified, Alexa has no sources of passive income.

Assume that in addition to renting the condo for 127 days, Alexa uses the condo for eight days of personal use. Also assume that Alexa receives $50,250 of gross rental receipts. Answer the following questions: (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)

a.  What is the total amount of for AGI deductions relating to the condo that Alexa may deduct in the current year? Assume she uses the IRS method of allocating expenses between rental and personal days.

b. What is the total amount of from AGI deductions relating to the condo that Alexa may deduct in the current year? Assume she uses the IRS method of allocating expenses between rental and personal days.

Answer 1

a. Since Alexa used the condo for 8 days, she must allocate the expenses between
personal use and rental use days. The portion attributable to rental days are
deductible as "for AGI" deduction
Gross rental income		$50,250
Expenses:
Insurance ($1800 x 127/135)	$1,693
Mortgage interest ($7400 x 127/135)	$6,961
Property taxes ($4350 x 127/135)	$4,092
Repairs and maintenance ($730 x 127/135)	$687
Utilities ($2400 x 127/135)	$2,258
Depreciation ($18600 x 127/135)	$17,498
Total expenses		$33,189
Net Rental income		$17,061
For AGI deduction		$33,189
b. Alexa may deduct the personal use portion of Property taxes from AGI.
Mortgage interest is not deductible as condo does not qualifies as personal residence
From AGI deduction ($4350 x 8/135)	$258