Jack and Cheryl own a cabin near Copper Mountain, Colorado. During the year, Jack and Cheryl rent the cabin for 30 days to friends for $1,800. Jack and Cheryl use the cabin a total of 60 days during the year. After making the appropriate allocation of planned expenses between personal and rental use, the following rental loss was determined:
?
$$\begin{array} { l r }
\text { Rental income } & \$ 1,800 \
\text { Property taxes } & ( 250 ) \
\text { Mortgage interest } & ( 950 ) \
\text { Repairs and maintenance } & ( 200 ) \
\text { Utilities } & ( 300 ) \
\text { Depreciation } & ( 400 ) \
\text { Rental loss } & \$ ( 300 )
\end{array}$$
How should Jack and Cheryl report the rental income and expenses for the forthcoming year?
I.Only expenses up to the amount of $1,800 rental income may be deducted for the year.
II.Only depreciation in the amount of $100 may be deducted.
III.The amount of the disallowed depreciation deduction ($300) can be carried forward.
IV.Nothing needs to be reported.
?

Question

Jack and Cheryl own a cabin near Copper Mountain, Colorado. During the year, Jack and Cheryl rent the cabin for 30 days to friends for $1,800. Jack and Cheryl use the cabin a total of 60 days during the year. After making the appropriate allocation of planned expenses between personal and rental use, the following rental loss was determined:
?
$$\begin{array} { l r } 
\text { Rental income } & \$ 1,800 \
\text { Property taxes } & ( 250 ) \
\text { Mortgage interest } & ( 950 ) \
\text { Repairs and maintenance } & ( 200 ) \
\text { Utilities } & ( 300 ) \
\text { Depreciation } & ( 400 ) \
\text { Rental loss } & \$ ( 300 )
\end{array}$$
How should Jack and Cheryl report the rental income and expenses for the forthcoming year?
I.Only expenses up to the amount of $1,800 rental income may be deducted for the year.
II.Only depreciation in the amount of $100 may be deducted.
III.The amount of the disallowed depreciation deduction ($300) can be carried forward.
IV.Nothing needs to be reported.
?

Quizplus · Accepted Answer

Jack and Cheryl should report the rental income of $1,800 and all rental-related expenses, up to the amount of $1,800, for the forthcoming year. This means that statement I is correct.
They can also deduct the depreciation expense of $100, which is the amount allowed for rental use, and carry forward the remaining disallowed amount of $300 as stated in statement III. Therefore, statements II and III are also correct. 
As the rental loss was determined, they cannot report nothing as stated in statement IV.

Jack and Cheryl Own a Cabin near Copper Mountain, Colorado