James rents his vacation home for 30 days during the year and lives in it personally for 10 days.He receives rents of $4,000 and incurs the following expenses before allocation:
What is James' income or loss from the rental property?

Question

James rents his vacation home for 30 days during the year and lives in it personally for 10 days.He receives rents of $4,000 and incurs the following expenses before allocation:  ​
What is James' income or loss from the rental property?

Quizplus · Accepted Answer

To calculate James' income or loss from the rental property, we need to allocate the expenses between the days the property was rented and the days James lived in it personally.

Expenses allocated to rental use: 
$8,000 x (30/365) = $657.53

Expenses allocated to personal use: 
$2,000 x (10/365) = $54.79

Net rental income: 
$4,000 - $657.53 = $3,342.47

Since James incurred more expenses than the rental income, he will have a loss from the rental property:

$3,342.47 - $4,000 = -$657.53

Therefore, the answer is C: $1,250 loss.

James Rents His Vacation Home for 30 Days During the Year