Question

Natalie owns a condominium near Cocoa Beach in Florida. This year, she incurs the following expenses in connection with her condo: $ Insurance Advertising expense Mortgage interest Property taxes Repairs & maintenance Utilities Depreciation 570 720 6.000 1,520 8.80 360 10,800 During the year, Natalie rented out the condo for 91 days, receiving $14,750 of gross income. She personally used the condo for 37 days during her vacation Assume Natalie uses the Tax Court method of allocating expenses to rental use of the property. Assume 365 days in the current year. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) Problem 14-59 Parta a. What is the total amount of for AGI (rental) deductions Natalie may deduct in the current year related to the condo (assuming she itemizes deductions before considering deductions associated with the condo)? For AGI deductions

$196,000

Answer 1

Part A :

Natallie Rented out condo for 91 days She personally used 37 days
	Amount ($)	Amount ($)
Gross Income (A)		14,750
Tier 1 Expenses
Advertising	720
Mortgage Interest (91/128)*6000	4,266
Property Tax(91/128)*1520	1,081
Tier 1 Expenses Total(B)		6,066
Balance (A-B)==c		8,684
Tier 2 Expenses
Insurance (91/128)*570	405
Repair & Maintenance (91/128)*880	626
Utilities(91/128)*860	611
Tier 2 Expenses Total(d)		1,642
Balance (c-d)		7,041
Tier 3 Expenses
Depreciaiton (91/128)*10800	7,678	7,041
( we can not charge more than $ 7041 as above)
Total for AGIdeduction
Tier 1 Expenses Total(B)	6,066
Tier 2 Expenses Total(d)	1,642
Tier 3 Expenses Total	7,041
Total for AGIdeduction	14,750

Part B

	Amount ($)
Mortgage Interest (37/128)*6000	1,734
Property Tax(37/128)*1520	439
Total From Itemized deduction	2,174

Part c

	Amount ($)
Starting Base	1,96,000
Less
Depreciation deducted
Balance as above ( $8684-$1642)	7,041
Adjusted Basis	1,88,959

Part d

Rental Income $ 2950 instead of $14750 , then It will disclose loss after absorption of Tier 1 cost . So Natalie can claim full Tier 1 expense Advertising , Proportionate share of Mortgage + property tax = Total amount $ 6066