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

A property rented for less than 15 days and used for personal use the remainder of the year, should have the rental income reported on Schedule E. This property is considered primarily personal and therefore, none of the rental income is included in gross income.

Rental income is generally reported on Schedule C.

Georgia owns a home in Colorado that she rents for $1,200 per month (she does not use the home personally). While she was in Europe in November, the roof in her rental home leaked and her tenant repaired it for $900. For the following month's rent (December), her tenant paid her $300 for rent ($1,200 - $900). What amounts should Georgia include for rental income and repair expense, respectively, for December?

If a family member of a taxpayer uses the rental property and pays full rental value, then those days rented are considered rental days.

Robert and Melissa own a home in Big Bear Lake, California. During the year, they rented it for 55 days for $11,000 and used it for 12 days for personal use. The expenses for the house included $12,000 in mortgage interest, $2,000 in property taxes, $1,000 in utilities, $600 in maintenance, and $4,000 in depreciation. What is their 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 number)

Royalties can be earned from allowing others the right to use:

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.

Jeremy and Gladys own a cabin in Sun Valley, Idaho, which they rented for 30 days. They also used the cabin with their family and friends for the ski season for 45 days. Their income and expenses were as follows: rental income $4,000, mortgage interest $3,000, property taxes $2,200, utilities $400, maintenance $400, and depreciation $4,800. How much depreciation expense can they deduct on Schedule E for the cabin? Use the IRS method for allocation of expenses.

A royalty is a payment for the right to use intangible property.

Kirk and Amy live in Augusta, Georgia. Every year during the Masters Golf Tournament, they rent their primary personal residence for 10 days for $10,000 to a large corporation that uses it to entertain clients. The rest of year, they reside full-time in their home. How should Kirk and Amy treat the rental income? Explain.