G owns a small rustic farm (her second home) in New England, which she rented out to tourists during the past year.She is actively involved in this rental activity, which is her only venture of this type.She rented the farm for 200 days during the year for $10,000.She also used it personally for 35 days.During the year, expenses allocable to the rental activity were, interest $5,000, taxes $4,000, maintenance and insurance $1,000, and depreciation expense allocable to the cottage of $4,000.For the year, her adjusted gross income was $160,000.With respect to the expenses attributable to the rental, G may

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CG can deduct expenses up to the amount of rental income received, which is $10,000. This includes the interest, taxes, maintenance, and insurance expenses totaling $10,000. Additionally, since G is actively involved in the rental activity and it is her only such venture, she can also deduct depreciation expense, making the total deductible expenses $14,000. However, the deduction of depreciation is subject to the passive activity loss rules, which may allow her to deduct it against her rental income. Since her adjusted gross income is $160,000, she may not be able to deduct the full amount of depreciation if it creates a loss, but she can still deduct up to the amount of her rental income.

G Owns a Small Rustic Farm (Her Second Home) in New