Natalie owns a condominium near Cocoa Beach in Florida. This year, she incurs th

Question

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

During the year, Natalie rented out the condo for 83 days, receiving $15,500 of gross income. She personally used the condo for 53 days during her vacation.

Assume Natalie uses the Tax Court method of allocating expenses to rental use of the property. Assume 366 days in the current year. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole dollar amount.)

a. What is the total amount of for AGI (rental) deductions Natalie may deduct in the current year related to the condo?

For AGI deductions?

b. What is the total amount of itemized deductions Natalie may deduct in the current year related to the condo?

itemized deductions?

c. If Natalie’s basis in the condo at the beginning of the year was $167,000, what is her basis in the condo at the end of the year?

Basis?

d. Assume that gross rental revenue was $3,100 (rather than $15,500). what amount of for AGI deductions may Natalie deduct in the current year related to the condo?

For AGI deductions?

Insurance $ 1,330 Advertising expense 700 Mortgage interest 5,700 Property taxes 1,330 Repairs & maintenance 750 Utilities 1,030 Depreciation 12,050

Explanation / Answer

a.

Gross rental income                                                                            $ 15500

Tier 1 expenses:

Advertising expense = 700

Mortgage interest = (83/366) × 5700= 1293

Property taxes = (83/366) × 1330 = 302

Less: total Tier 1 expenses                                                                 (2295)

Balance                                                                                               13205

Tier 2 expenses:

Insurance = (83/136) × 1330 = 812

Repairs & Maintenance = (83/136) ×750= 458

Utilities= (83/136) × 1030 = 629

Less: total Tier 2 expenses                                                                  (1899)

Balance                                                                                               11306

Tier 3 expenses: Depreciation (83/136) × 12050 = 7354                    (7354)

Balance—net income from rental of condo                                        3952

Total “For AGI” deductions (2295 + 1899 + 7354)                          11548

b.

Mortgage interest [(283/366) × 5700]                                   4407

Real property taxes [(283/366) × 1330]                                              1028

Total “from AGI” deductions                                                                5435

c.Beginning basis                                                                                267000

Less: depreciation actually deducted                                                (7354)

Adjusted basis                                                                                    259646

d. (3100 – 2295) = 805

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