Alexa owns a condominium near Cocoa Beach in Florida. This year, she incurs the

Question

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

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.

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

Explanation / Answer

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

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