During the current year, Kassandra incurs the following expenses with respect to

Question

During the current year, Kassandra incurs the following expenses with respect to her beachfront condominium in Hawaili (Click the icon to view the data.) In addition to the expenses listed above, Kassandra could have deducted a total of $8,400 depreciation if the property had been acquired only for investment purposes. During the year, Kassandra uses the condominium 40 days for vacation. She also rents it out for a total of 60 days during the year, generating a total gross income of $9,600 Read the requirements. Requirement a. What is the total amount of deductions for and from AGI that Kassandra may take during the current year with respect to the condominium using the IRS allocation method? (For purposes of this problem, use the allocation formula set forth by Sec. 280A. Enter "O for zero amounts.) tem For AGI From AGI More Info Insurance Repairs and maintenance Interest on mortgage Property taxes Utilities Depreciation Total deductions Requirement b. What is the effect on the basis of the condominium? The basis of the condominium is tem Amount Insurance Repairs and maintenance Interest on mortgage Property taxes Utilities S 620 740 2,600 2,200 2,200 Done increased by $4,584 increased by $8,400. decreased by $4,584 decreased by $8,400 neither increased nor decreased.

Explanation / Answer

Computation of Total Amount of Deduction Item For AGI From AGI Calculation Insurance $372.00 $620 x 60/100 days Repairs & Maintenance $444.00 $740 x 60/100 days Interest on Mortgage $1,560.00 $1,040.00 $2600 x 60/100 days Property Taxes $1,320.00 $880.00 $2200 x 60/100 days Utilities $1,320.00 $2200 x 60/100 days Depreciation $4,500.00 $8400 x 60/100 days = 5040 but limited to $4,500 for AGI deduction Total Deductions $9,516.00 $1,920.00 Computation of Effect on the basis of Condominimum Total Gross Income generated by rent it out for 60 Days (a) $9,600 Insurance $372.00 Repairs & Maintenance $444.00 Interest on Mortgage $1,560.00 Property Taxes $1,320.00 Utilities $1,320.00 Total (b) $5,016.00 a-b $4,584.00 Hence the basis of Condominum will be reduced by $4584

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