ExpertMedium1 markMultiple Choice
CPA · Question 68 · Area I: Individual Compliance and Planning
A taxpayer owns a vacation home used 30 days for personal use and rented for 100 days. Rental income is $10,000. Expenses are: Mortgage Interest/Taxes $4,000; Utilities/Maintenance $8,000; Depreciation $5,000. What is the deductible loss?
A taxpayer owns a vacation home used 30 days for personal use and rented for 100 days. Rental income is $10,000. Expenses are: Mortgage Interest/Taxes $4,000; Utilities/Maintenance $8,000; Depreciation $5,000. What is the deductible loss?
Answer options:
A.
$0
B.
$7,000
C.
$2,000
D.
$5,000
How to approach this question
Vacation Home Rules: 1. Personal Use (30) > Greater of 14 or 10% of Rental (10). 2. Classified as Residence. 3. Expenses limited to Income. 4. Cannot generate a loss.
Full Answer
A.$0✓ Correct
IRC §280A. Because personal use exceeds the greater of 14 days or 10% of rental days, the property is a residence. Rental expenses are deductible only to the extent of rental income. No loss is allowed.
Common mistakes
Deducting the loss; misclassifying as rental property.
Practice the full CPA TCP Practice Exam 5
68 questions · hints · full answers · grading
More questions from this exam
Q01In Year 1, an executive is granted an Incentive Stock Option (ISO) to purchase 1,000 shares of co...MediumQ02A taxpayer has a $500,000 interest-free loan from their employer outstanding for the entire Year ...MediumQ03A taxpayer wants to donate stock held for 5 years to a public charity. The stock has an adjusted ...MediumQ04An individual taxpayer had an AGI of $160,000 in Year 1 and a tax liability of $30,000. In Year 2...MediumQ05A taxpayer invests $50,000 cash for a 20% interest in a partnership. The partnership takes out a ...Hard