Kenneth lived in his home for the entire year except for when he rented his home (near a very nice ski resort)to a married couple for 14 days in December. The couple paid Kenneth $14,000 in rent for the two weeks. Kenneth incurred $1,000 in direct expenses relating to the home for the 14 days. Which of the following statements accurately describes the manner in which Kenneth should report his rental receipts and expenses for tax purposes?
A)Kenneth would include the rental receipts in gross income and deduct the rental expenses for AGI.
B)Kenneth would exclude the rental receipts from gross income and deduct the rental expenses for AGI.
C)Kenneth would include the rental receipts in gross income and would not deduct the rental expenses because he used the residence for personal purposes for most of the year.
D)Kenneth would exclude the rental receipts, and he would not deduct the rental expenses.

Question

Quizplus · Accepted Answer

Since Kenneth rented out his home for fewer than 15 days during the year, the tax rule allows him to exclude the rental income from his gross income, and he cannot deduct any rental expenses. This is a specific exception in the tax code for short-term rentals.

Kenneth Lived in His Home for the Entire Year Except