Asked by Dylan Gauthier on May 20, 2024
Verified
Meredith has a vacation rental house in the Sierra Mountains.During the year,she and her immediate family used the house for 12 days for a personal vacation.Meredith spent two more weekends (4 days in total)repairing the deck.Meredith also rented her house (at fair value)to her brother and his family for 9 days (in addition to her personal use).The house was rented for 180 days.How should the cabin be categorized this year for tax purposes? Explain your answer.
Fair Value
Fair Value is the estimated market price of an asset or liability, reflecting the price at which an informed transaction would take place between willing participants.
Tax Purposes
Refers to the specific motives or reasons related to computing taxable income, determining tax liabilities, and fulfilling tax reporting requirements under the law.
- Identify the differences between using property for personal versus rental purposes and recognize the tax consequences.
- Grasp the management of rental revenue and costs for properties employed for personal enjoyment and rental activities.
Verified Answer
SB
Sasha BarbosaMay 23, 2024
Final Answer :
The cabin is categorized as personal/rental since the property would be used for more than 18 days for personal use.Rental by family members still counts as personal use even if it is rented for the fair rental value.
Learning Objectives
- Identify the differences between using property for personal versus rental purposes and recognize the tax consequences.
- Grasp the management of rental revenue and costs for properties employed for personal enjoyment and rental activities.