During the current year, Kim incurs the following expenses with respect to her beachfront condominium in Hawaii:
|Repairs and maintenance||700|
|Interest on mortgage||3,000|
In addition to the expenses listed above, Kim could have deducted a total of $8,000 depreciation if the property had been acquired only for investment purposes. During the year, Kim uses the condominium 20 days for vacation. She also rents it out for a total of 60 days during the year, generating a total gross income of $9,000. During the year, generating a total gross income of $9,000.
a. What is the total amount of deductions for and from AGI that Kim may take during the current year with respect to the condominium using the IRS allocation method?
b. What is the effect on the basis of the condominium?
Generally, there are two types of deductions namely; itemized and standard deductions. Itemized deductions are listed separately if one incurs a large deductible expenses while standard deductions is the total amount that one can subtract from their gross income.
Answer and Explanation: 1
a. Computation of total amount of expenses:
Deductions=Insurance+ Repair and maintenance+ Interest on mortgage+ property...
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fromChapter 3 / Lesson 5
In this lesson, we'll discuss allowable deductions that reduce taxable income. You'll learn about each deduction and its limitations. We'll also explore how to calculate tax liability after subtracting deductions.