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12 August, 10:41

John owns a second home in Palm Springs, CA. During the year, he rented the house for $4,000 for 36 days and used the house for 14 days during the summer. The house remained vacant during the remainder of the year. The expenses for the home included $5,000 in mortgage interest, $600 in property taxes, $900 for utilities and maintenance, and $3,500 of depreciation. What is John's deductible rental loss, before considering the passive loss limitations?

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  1. 12 August, 12:47
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    John's deductible rental loss is $3200

    Explanation:

    Given data

    rented the house = $4,000

    time = 36 months

    mortgage interest = $5000

    property taxes = $600

    utilities and maintenance = $900

    depreciation = $3500

    to find out

    rental loss

    solution

    we know here proportion rental expenses are for 36 days and 14 day used house of total expenses

    total expenses are = mortgage interest + property taxes + utilities and maintenance + depreciation

    total expenses = 5000 + 600 + 900 + 3500

    total expenses = $10000

    proportion rental expenses = 10000 * 36 days / (365+14)

    proportion rental expenses = $7200

    so rental loss = rental expenses - rental income

    rental loss = $7200 - $4000

    rental loss = $3200

    so John's deductible rental loss is $3200
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