Abby owns a condominium in the Great Smokey Mountains.During the year,Abby uses the condo a total of 21 days.The condo is also rented to tourists for a total of 79 days and generates rental income of $12,500.Abby incurs the following expenses: $$\begin{array} { | l | r | }
\hline \text { Expense } & \text { Amount } \
\hline \text { Mortgage interest } & \$ 4,100 \
\hline \text { Property taxes } & 1,900 \
\hline \text { Utilities } & 2,200 \
\hline \text { Insurance } & 1,200 \
\hline \text { Depreciation } & 10,000 \
\hline
\end{array}$$ Using the IRS method of allocating expenses,the amount of depreciation that Abby may take with respect to the rental property will be

Question

Abby owns a condominium in the Great Smokey Mountains.During the year,Abby uses the condo a total of 21 days.The condo is also rented to tourists for a total of 79 days and generates rental income of $12,500.Abby incurs the following expenses: $$\begin{array} { | l | r | } 
\hline \text { Expense } & \text { Amount } \
\hline \text { Mortgage interest } & \$ 4,100 \
\hline \text { Property taxes } & 1,900 \
\hline \text { Utilities } & 2,200 \
\hline \text { Insurance } & 1,200 \
\hline \text { Depreciation } & 10,000 \
\hline
\end{array}$$ Using the IRS method of allocating expenses,the amount of depreciation that Abby may take with respect to the rental property will be

Quizplus · Accepted Answer

IRS method of allocating expenses allocates expenses based on the ratio of rental days to total days of use. In this case, the condo was rented for 79 days and Abby used it for 21 days, for a total of 100 days. Therefore, the portion of depreciation that Abby may take with respect to the rental property is 79/100 * $10,000 = $7,900.

Abby Owns a Condominium in the Great Smokey Mountains Using the IRS Method of Allocating Expenses,the Amount of Depreciation