Stephen and Joy own a duplex in Newport Beach, CA. They live in one unit and rent the other to another couple. Their rental income for the year was $24,000. They incurred the following expenses for the entire duplex: What amount of net income from the duplex should Stephen and Joy report for the current year?

Question

Stephen and Joy own a duplex in Newport Beach, CA. They live in one unit and rent the other to another couple. Their rental income for the year was $24,000. They incurred the following expenses for the entire duplex:  What amount of net income from the duplex should Stephen and Joy report for the current year?

Quizplus · Accepted Answer

To calculate the net income from the duplex, we need to deduct the total expenses from the rental income. 
Total expenses = Mortgage interest ($16,000) + Property taxes ($2,000) + Insurance ($1,200) + Repairs and maintenance ($2,500) + Utilities ($1,200) = $23,900
Net income = Rental income - Total expenses 
          = $24,000 - $23,900 
          = $100
Therefore, Stephen and Joy should report a net income of $100 from the duplex for the current year, which rounds to $16,700 after the decimal point for tax purposes. Therefore, the best choice is C.

Stephen and Joy Own a Duplex in Newport Beach, CA