Leslie and Devin own a beach cottage that they rented 30 days for $4,500.They used the cottage for personal use for 45 days during the year.The allocated expenses related to the cottage total $6,000,resulting in a net loss of $1,500 for this rental activity.What is the proper tax treatment of these amounts by Leslie and Devin?

Question

Quizplus · Accepted Answer

Since the property was rented for more than 14 days, the income must be reported. However, the IRS rules state that rental expenses cannot exceed rental income when the property is used personally for the greater of 14 days or 10% of the total days rented. Therefore, Leslie and Devin can report the income and expenses on Schedule E, but the expenses reported cannot exceed the income earned from the rental activity.

Leslie and Devin Own a Beach Cottage That They Rented