Richard owns a cabin in Utah that he rented for $4,000 for 21 days.He lived there for a total of 120 days.The expenses for the home included $8,000 in mortgage interest,$1,200 in property taxes,$1,300 in maintenance and utilities,and $3,500 in depreciation.How much net income or loss from the Utah home would Richard report for the current year (use the IRS method)? (Round your answer to the nearest whole number)
A)$0.
B)$1,915 net income.
C)$4,000 net income.
D)$10,000 net loss.

Question

Quizplus · Accepted Answer

To calculate the net income or loss from the rental property, we first determine the portion of expenses that can be deducted for the rental period. The property was rented for 21 days and used personally for 120 days, totaling 141 days of use. The proportion of rental use is 21/141. The total expenses are the sum of mortgage interest, property taxes, maintenance and utilities, and depreciation, which equals $8,000 + $1,200 + $1,300 + $3,500 = $14,000. The deductible portion of these expenses for the rental period is $14,000 * (21/141) = $2,085. The rental income is $4,000, so the net income from the rental property is $4,000 - $2,085 = $1,915.

Richard Owns a Cabin in Utah That He Rented for $4,000