Mackensie owns a condominium in the Rocky Mountains. During the year, Mackensie uses the condo a total of 23 days. The condo is also rented to tourists for a total of 77 days and generates rental income of $10,900. Mackensie incurs the following expenses in the condo: $$\begin{array} { | l | r | }
\hline \text { Expense } & { \text { Amount } } \
\hline \text { Mortgage interest } & \$ 5,000 \
\hline \text { Property taxes } & 3,500 \
\hline \text { Utilities } & 2,500 \
\hline \text { Insurance } & 1,800 \
\hline \text { Depreciation } & 11,000 \
\hline
\end{array}$$ Using the court's method of allocating expenses, the amount of depreciation that Mackensie may take with respect to the rental property will be

Question

Mackensie owns a condominium in the Rocky Mountains. During the year, Mackensie uses the condo a total of 23 days. The condo is also rented to tourists for a total of 77 days and generates rental income of $10,900. Mackensie incurs the following expenses in the condo: $$\begin{array} { | l | r | } 
\hline \text { Expense } & { \text { Amount } } \
\hline \text { Mortgage interest } & \$ 5,000 \
\hline \text { Property taxes } & 3,500 \
\hline \text { Utilities } & 2,500 \
\hline \text { Insurance } & 1,800 \
\hline \text { Depreciation } & 11,000 \
\hline
\end{array}$$ Using the court's method of allocating expenses, the amount of depreciation that Mackensie may take with respect to the rental property will be

Quizplus · Accepted Answer

The court's method allocates expenses based on the ratio of rental days to total days of use. The condo is rented for 77 days and used for 23 days, totaling 100 days. The depreciation allocated to rental use is (77/100) * $11,000 = $8,470. However, since the rental income is $10,900 and total expenses (excluding depreciation) are $12,800, the depreciation is limited to the rental income minus other expenses, which is $10,900 - $5,000 - $3,500 - $2,500 - $1,800 = $1,044.

Mackensie Owns a Condominium in the Rocky Mountains Using the Court's Method of Allocating Expenses, the Amount of Year