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10 November, 18:02

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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  1. 10 November, 19:19
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    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
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