Harriet owns a second home that she rents to others.During the year, she used the second home for 10 personal days and for 200 rental days.Which of the following statements regarding the manner in which she should account for her income and/or expenses associated with the home is incorrect?

Question

Quizplus · Accepted Answer

Harriet will only be allowed to deduct a portion of the mortgage interest on the loan secured by the property, based on the ratio of rental days to total days (in this case, 200/210 or approximately 95%). This is because the property is considered a "mixed-use" property, used for both personal and rental purposes. All other statements are correct: Harriet's deductible expenses are not limited to the amount of gross rental income (as long as they are reasonable and ordinary expenses for the rental business), all rental receipts must be included in gross income, and expenses must be allocated between rental and personal use.

Harriet Owns a Second Home That She Rents to Others