Tom and RoseMary own a cabin near Stowe,Vermont.During the current year the cabin is rented for 31 days for $1,800.Tom and RoseMary used the cabin a total of 12 days during the year.After making the appropriate allocation of expenses between personal and rental use,the following rental loss was determined:
How should Tom and RoseMary report the rental income and expenses for the current year?
A)Include the $1,700 in gross income, but no deductions are allowed.
B)Report the $300 loss for AGI.
C)Only expenses up to the amount of $1,700 rental income may be deducted in the current year.
D)Report the interest ($950) and taxes ($150) as itemized deductions and the other expenses for AGI.
E)No reporting for the rental activity should be reported.

Question

Tom and RoseMary own a cabin near Stowe,Vermont.During the current year the cabin is rented for 31 days for $1,800.Tom and RoseMary used the cabin a total of 12 days during the year.After making the appropriate allocation of expenses between personal and rental use,the following rental loss was determined:  ​
How should Tom and RoseMary report the rental income and expenses for the current year?
A)Include the $1,700 in gross income, but no deductions are allowed. 
B)Report the $300 loss for AGI. 
C)Only expenses up to the amount of $1,700 rental income may be deducted in the current year. 
D)Report the interest ($950) and taxes ($150) as itemized deductions and the other expenses for AGI. 
E)No reporting for the rental activity should be reported.

Quizplus · Accepted Answer

Tom and RoseMary can report the $300 rental loss for AGI because they used the property for less than 14 days during the year and rented it for less than 15 days. They cannot deduct any expenses beyond their rental income in the current year, but they can carry forward any excess rental losses to future years. The interest and taxes can be reported as itemized deductions.

Tom and RoseMary Own a Cabin near Stowe,Vermont