I. Monica owns a second home in Lake Geneva. During the year she rented out the

Question

I. Monica owns a second home in Lake Geneva. During the year she rented out the home for six months and received rental income of $30,000. She spent sixteen (16) days there herself during the last year. The cost of maintaining the Lake Geneva property for the year totaled $40,000. What is the income tax consequence or this property? a. Since Monica used the property herself more than (14) days, the Joss is not deductible. b. Monica cannot deduct the losses but docs not have to report the income either. c. Monica may deduct the $I0.000 loss on her individual income tax return. d. Monica must prorate the loss for the property between personal and rental use.

Explanation / Answer

Since Monica spent 16 days there herself during the last year, she may deduct the $ 10,000 loss on her individual income tax return.( Cost of Maintenance $ 40,000 less Rental Income of $ 30,000).

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