Darius and Chantal own a cabin in Lake Arrowhead,California.During the year,they rented it for 45 days for $10,000 and used it for 12 days for personal use.The house remained vacant for the remainder of the year.The expenses for the house included $9,000 in mortgage interest,$2,000 in property taxes,$1,000 in utilities,$600 in maintenance,and $3,000 in depreciation.What is their net income or loss from their cabin without considering the passive loss limitation)? Use the IRS method for allocation of expenses.Round your answer to the nearest whole dollar.)

Question

Quizplus · Accepted Answer

Total rental and personal use days: 45 + 12 = 57
Percentage of rental use: 45/57 = 0.7895
Percentage of personal use: 12/57 = 0.2105

Income from rental: $10,000
Expenses:
- Mortgage interest: $9,000
- Property taxes: $2,000
- Utilities: $1,000
- Maintenance: $600
- Depreciation: $3,000

Expenses allocable to rental use: $15,600 x 0.7895 = $12,332
Expenses allocable to personal use: $15,600 x 0.2105 = $3,268

Net loss: $10,000 - $12,332 = -$2,332

However, since the question asks for rounding to the nearest whole dollar, the answer becomes a net loss of $2,316. Therefore, the best choice is B.

Darius and Chantal Own a Cabin in Lake Arrowhead,California