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Randolph and Tammy own a second home. They spent 45 days there and rented it for 88 days at $159 per day during the year. The total costs relating to the home include the following: (Round your intermediate computations to 5 decimal places and final answers to nearest whole dollar value).
Mortgage interest $ 4,680
Property taxes 1,290
Insurance 1,935
Utilities 2,435
Repairs 1,545
Depreciation 6,680
a)What is the tax treatment of these items relating to second home under Tax Court allocation method?
b) What is the tax treatment of these items relating to second home under IRS allocation method?
c) Which of the methods is preferred?

Respuesta :

A- compute the net income under tax court allocation as follows

Total deductions is $6,532, Net rental income is $4,219  

Note: Total days = 133 days (88 rental days + 45 personal use days)

B:  the net income under IRS allocation as follows Total deductions is $4,021,Net income is $1,708  

C: In this situation, the IRS allocation technique methods is preferred . A deduction is allocated (or attributed, matched, etc.) to the class or classes of gross income to which it is unquestionably related after first identifying the relevant class of gross revenue. The standards applied to decide whether a deduction is. The IRS technique divides the total number of days used (rental days plus personal days) by the number of days rented.

Learn more about IRS allocation technique here:

https://brainly.com/question/28267811

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