Mike owns a house that he rents out for $1,000 per month.His expenses for the 2013 tax year are as follows: $\begin{array}{lr}
\text { Real estate taxes } & \$ 1,500 \
\text { Mortgage interest } & \$ 4,200 \
\text { Insurance } & \$ 600 \
\text { General repairs } & \$ 620
\end{array}$ Mike bought the property in September of 1995,and his basis for depreciation on the house is $137,500.He uses straight-line depreciation with a 27 ½-year life,so the depreciation on the house is $5,000.Mike does not use a property manager and handles all aspects of the rental activity himself.
a.Calculate Mike's net income or loss from renting the house if his gross rental income is
$12,000 $1,000 * 12 months).
b.Is the income or loss on Mike's rental considered to be active,passive,or portfolio income?

Question

Mike owns a house that he rents out for $1,000 per month.His expenses for the 2013 tax year are as follows: $\begin{array}{lr}
\text { Real estate taxes } & \$ 1,500 \
\text { Mortgage interest } & \$ 4,200 \
\text { Insurance } & \$ 600 \
\text { General repairs } & \$ 620
\end{array}$ Mike bought the property in September of 1995,and his basis for depreciation on the house is $137,500.He uses straight-line depreciation with a 27 ½-year life,so the depreciation on the house is $5,000.Mike does not use a property manager and handles all aspects of the rental activity himself. 
a.Calculate Mike's net income or loss from renting the house if his gross rental income is
$12,000 $1,000 * 12 months).
b.Is the income or loss on Mike's rental considered to be active,passive,or portfolio income?

Quizplus · Accepted Answer

The Answer of Mike owns a house that he rents out for $1,000 per month.His expenses for the 2013 tax year are as follows: $\begin{array}{lr}
\text { Real estate taxes } & \$ 1,500 \
\text { Mortgage interest } & \$ 4,200 \
\text { Insurance } & \$ 600 \
\text { General repairs } & \$ 620
\end{array}$ Mike bought the property in September of 1995,and his basis for depreciation on the house is $137,500.He uses straight-line depreciation with a 27 ½-year life,so the depreciation on the house is $5,000.Mike does not use a property manager and handles all aspects of the rental activity himself. 
a.Calculate Mike's net income or loss from renting the house if his gross rental income is
$12,000 $1,000 * 12 months).
b.Is the income or loss on Mike's rental considered to be active,passive,or portfolio income?

Mike Owns a House That He Rents Out for $1,000