Exam 8: Rental Property, Royalties, and Income From Flow-Through Entities

All advance rental payments received,including security deposits for a rental property,must be reported as income when received.

A primarily rental property may report its income and expenses on a Schedule E.

Which of the following statements is true concerning vacation home properties?

Jonathan and Sandy rented their cabin for 123 days and used the cabin for personal use for 55 days.The cabin is considered personal/rental property.

Royalty income is income received from the use of books,stories,plays,copyrights,trademarks,etc.owned by the taxpayer.

In the case of personal/rental property,a taxpayer can deduct expenses only to the extent that there is rental income.

All rental properties are depreciated using the straight-line method over 39 years.

Owen and Jessica own and operate an S corporation.Each is a 50% owner.The business reports the following results: How do Owen and Jessica report these items for tax purposes?

Alexis' cabin in the mountains that was rented for 125 days and used by her for 12 days is considered personal/rental property.

Elizabeth rented her personal residence for 12 days to summer vacationers for $4,800.Rest of the year,she and her family used the home as their personal residence.She has AGI of $105,000,excluding the rental income.Related expenses for Elizabeth's personal residence for the year include the following: What is Elizabeth's AGI after taking into consideration the rental income and related expenses for her home?

Rental activities by definition are passive activities.

Rental properties that are also used as vacation homes fall under one of three categories: (1)primarily rental, (2)primarily personal,and (3)personal/rental.

Charles and Sarah own a home in Palm Springs,CA.During the year,they rented the house for 40 days for $5,000 and used it for personal use for 18 days.The house remained vacant for the remainder of the year.The expenses for the house included $16,000 in mortgage interest,$4,500 in property taxes,$1,000 in utilities,$1,200 in maintenance,and $9,800 in depreciation.What is the deductible loss for the rental of their home (without considering the passive loss limitation)? Use the Tax Court method for allocation of expenses.

Explain what is considered personal use of a rental property.

Ariel,Bob,Candice and Dmitri are equal partners in a local ski resort.The resort reports the following items for the current year: Each partner receives a Schedule K-1 with one-fourth of the preceding items reported to him/her.How must each individual report these results on his/her Form 1040?

Darius and Chantal own a cabin in Lake Arrowhead,California.During the year,they rented it for 45 days for $10,000 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 $9,000 in mortgage interest,$2,000 in property taxes,$1,000 in utilities,$600 in maintenance,and $3,000 in depreciation.What is their net income or loss from their cabin (without considering the passive loss limitation)? Use the IRS method for allocation of expenses.(Round your answer to the nearest whole dollar)

Joey and Susan rented their house for 2 weeks and used it for personal use for the remainder of the year.The house is considered personal/rental property.

Which of the following entity(ies)is(are)considered flow-through entity(ies)?

Eddie and Camilla received $11,600 for the rental of their rental house in Irvine,California.Eddie and Camilla do not use this property for personal use.The rent covers six months from October 1 of the current year to March 31 of next year.The amount also includes a security deposit of $2,000.How much should Eddie and Camilla report as rental income in the current tax year?

From which of the following flow-through entities is the ordinary income (K-1)considered self-employment income?