Lori and Donald own a condominium in Colorado Springs,Colorado,that they rent out part of the time and use during the summer.The rental property is classified as personal/rental property and their personal use is determined to be 75% (based on the IRS method) .They had the following income and expenses for the year (before any allocation) : $4,000\begin{array}{lll}\text { Gross rental income}&\$2,000\\\text {Interest and taxes }&3,200\\\text { Utilities and maintenance}&2,200\\\text {Depreciation }&4,000\\\end{array}$
How much net loss should Lori and Donald report for their condominium on their tax return this year?

A) $0.
B) $3,350 loss.
C) $7,400 loss.
D) $9,000 loss.

Question

Lori and Donald own a condominium in Colorado Springs,Colorado,that they rent out part of the time and use during the summer.The rental property is classified as personal/rental property and their personal use is determined to be 75% (based on the IRS method) .They had the following income and expenses for the year (before any allocation) :

4,000\begin{array}{lll}\text { Gross rental income}&\$2,000\\\text {Interest and taxes }&3,200\\\text { Utilities and maintenance}&2,200\\\text {Depreciation }&4,000\\\end{array}

How much net loss should Lori and Donald report for their condominium on their tax return this year?

A) $0.
B) $3,350 loss.
C) $7,400 loss.
D) $9,000 loss.

Jenny Zhang · Accepted Answer

Final Answer : A, Explanation :  Since Lori and Donald's personal use of the condominium is 75%, the property is considered a personal residence for tax purposes. Therefore, they cannot deduct any rental loss on their tax return. The IRS rules do not allow the deduction of losses associated with the rental of a personal residence.

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