Katy owns a second home. During 2014, she used the home for 20 personal use days and 50 rental days. Katy allocates expenses associated with the home between rental use and personal use. Katy did not incur any expenses to obtain tenants. Which of the following statements is correct regarding the tax treatment of Katy's income and expenses from the home?

Question

Quizplus · Accepted Answer

A is correct because rental receipts must be included in gross income and expenses allocated to rental use of the home may be deducted for AGI.
B is correct because interest expense and property taxes not allocated to rental use of the home may be deducted from AGI.
C is correct because if rental receipts exceed deductible expenses, Katy may not report a loss from the rental property. 
Therefore, all statements are correct.

Katy Owns a Second Home