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:

Insurance $ 4,200

Mortgage interest 8,800

Property taxes 2,700

Repairs & maintenance 550

Utilities 3,600

Depreciation 14,600

During the year, Alexa rented out the condo for 165 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 165 days, Alexa uses the condo for eight days of personal use. Also assume that Alexa receives $36,000 of gross rental receipts. Answer the following questions:

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.

Explanation / Answer

Answer:- Calculation of Balance AGI Rental Income:-

Expenses reduces AGI by $34,450. Alexa's property is treated as a non-residence with rental use property because she rented it for 165 days and did not use it all for personal purposes. The rental deduction are fully deductible for AGI. Thus the expenses reduces Alexa's AGI by $34,450 and the Gross Total Income increases the AGI by $ 36,000. Overall Alexa's AGI will be increased by the rental Net income of $1,550.

Gross Total Income $36,000 Expenses:- Insurance (4,200) Mortgage Interest (8,800) Property Taxes (2,700) Repairs and Maintenance (550) Utilities (3,600) Depreciation (14,600) Less: Total Expenses (34,450) Balance - Net Rental Income 1,550

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