calculate chee's net income from the vacation home itemized deductions and taxable income for the year depreciation on rental portion of vacation home net income from vacation home itemized deductions taxable income

Question Completion:

Chee single, age 40, had the following income and expenses during 2019:

Income Salary $43,000

Rental of vacation home (rented 60 days, used personally 60 days, vacant 245 days) 4,000

Municipal bond interest 2,000

Dividend from General Electric 400

Expenses

Interest on home mortgage 8,400

Interest on vacation home 4,758

Interest on loan used to buy municipal bonds 3,100

Property tax on home $ 2,200

Property tax on vacation home 1,098

State income tax 3,300

State sales tax 900

Charitable contributions 1,100

Tax return preparation fee 300

Utilities and maintenance on vacation home 2,600

Depreciation on rental portion of vacation home 3,500

Chee

a) Rental income                 $4,000

Less: Taxes and interest

 (60/365 × $5,856);

   court's approach                (963)

Remainder                           $3,037

Less: Utilities and maintenance

(60/120 × $2,600)               (1,300)

Remainder                           $1,737

d) Less: Depreciation

($3,500, limited to $1,737) (1,737)

Net income from

 vacation home                     $0

b) Itemized deductions:

State income tax                         $3,300

Property tax on home                   2,200

Interest on home mortgage         8,400

Interest and property tax on

vacation home                             4,893

Charitable contributions               1,100

Tax return preparation fee            0

Total itemized deductions        (19,893)

Income:

Salary                                           $43,000

Dividend                                              400

Net income from vacation home       0

Adjusted gross income              $43,400

b) Itemized deductions:

State income tax                         $3,300

Property tax on home                   2,200

Interest on home mortgage         8,400

Interest and property tax on

vacation home                             4,893

Charitable contributions               1,100

Tax return preparation fee            0

Total itemized deductions        (19,893)

c) Taxable income                  $23,507

d) Depreciation ($3,500, limited to $1,737) = $1,737

Explanation:

a) Data and Calculations:

Income Salary                       $43,000

Rental of vacation home          4,000

Municipal bond interest           2,000

Dividend from General Electric  400

Expenses

Interest on home mortgage    8,400

Interest on vacation home       4,758

Interest on loan used

to buy municipal bonds          3,100

Property tax on home            $ 2,200

Property tax on vacation home 1,098

State income tax                       3,300

State sales tax                             900

Charitable contributions           1,100

Tax return preparation fee        300

Utilities and maintenance

on vacation home                 2,600

Depreciation on rental

 portion of vacation home   3,500

Income:

Salary                                           $43,000

Dividend                                              400

Net income from vacation home       0

Adjusted gross income              $43,400

b) Itemized deductions:

State income tax                         $3,300

Property tax on home                   2,200

Interest on home mortgage         8,400

Interest and property tax on

vacation home                             4,893

Charitable contributions               1,100

Tax return preparation fee            0

Total itemized deductions        (19,893)

Taxable income                      $23,507

c) The municipal bond interest of $2,000 is not taxable and is excluded from the gross income.  The interest expense of $3,100 on the loan to buy municipal bonds is likewise not deductible.

d) Note that $4,893 ($5,856 total − $963 vacation home portion) of property tax and mortgage interest on the vacation home are itemized deductions.

e)  The state income taxes paid ($3,300) exceed state sales taxes paid ($900).

f) Tax preparation fees are miscellaneous itemized deductions and are not deductible.