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:
?
$$\begin{array} { l c }
\text { Rental income } & \$ 1700 \
\text { Property taxes } & ( 150 ) \
\text { Mortgage interest } & ( 950 ) \
\text { Repairs and maintenance } & ( 400 ) \
\text { Utilities } & ( 300 ) \
\text { Depreciation } & ( 200 ) \
\text { Rental loss } & \$ ( 300 )
\end{array}$$
How should Tom and RoseMary report the rental income and expenses for the current year?

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:
?
$$\begin{array} { l c } 
\text { Rental income } & \$ 1700 \
\text { Property taxes } & ( 150 ) \
\text { Mortgage interest } & ( 950 ) \
\text { Repairs and maintenance } & ( 400 ) \
\text { Utilities } & ( 300 ) \
\text { Depreciation } & ( 200 ) \
\text { Rental loss } & \$ ( 300 )
\end{array}$$
How should Tom and RoseMary report the rental income and expenses for the current year?

Quizplus · Accepted Answer

Tom and RoseMary can report the $300 rental loss for AGI. Since the rental use is less than 15 days, they cannot deduct any expenses beyond the rental income. Therefore, they should report the $1,800 rental income and deduct expenses up to $1,800, resulting in a $300 loss that can be used to offset other taxable income. They cannot itemize the interest and taxes as those are related to the personal use of the cabin. Option A is incorrect because deductions are allowed, and Option C is incorrect because it limits the deduction to only rental income. Option D is incorrect because interest and taxes cannot be itemized as they pertain to personal use of the cabin. Option E is incorrect as rental income and expenses must be reported.

Tom and RoseMary Own a Cabin near Stowe, Vermont How Should Tom and RoseMary Report the Rental Income and the Current