Darren and Nikki own a cabin in Mammoth, California. During the year, they rented it for 45 days for $9,000 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 $8,000 in mortgage interest, $2,000 in property taxes, $1,200 in utilities, $750 in maintenance, and $4,000 in depreciation. What is their net income or loss from their cabin rental (without considering the passive loss limitation) ? Use the IRS method for allocation of expenses.

Question

Graham Bentley

Business

15 June, 20:29

Darren and Nikki own a cabin in Mammoth, California. During the year, they rented it for 45 days for $9,000 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 $8,000 in mortgage interest, $2,000 in property taxes, $1,200 in utilities, $750 in maintenance, and $4,000 in depreciation. What is their net income or loss from their cabin rental (without considering the passive loss limitation) ? Use the IRS method for allocation of expenses.

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Answers (1)

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Deangelo Cabrera · Answer 1

Total loss = 3,592.1053

Explanation:

Given:

Income from rent (For 45 days) = $9,000

Personal use = 12 days

Mortgage = $8,000

Property taxes = $2,000

Utilities = $1,200

Maintenance = $750

Depreciation = $4,000

Computation:

Total Allocated expenses = 45 days / 57 days [$8,000 + $2,000 + $1,200 + $750 + $4,000]

Total Allocated expenses = 45 / 57 [15,950]

Total Allocated expenses = $12,592.1053

Total loss = Total Allocated expenses - Income from rent

Total loss = $12,592.1053 - $9,000

Total loss = 3,592.1053