Matt and Marie own a vacation home at the beach. During the year, they rented the house for 42 days (6 weeks) at $890 per week and used it for personal use for 58 days. The total costs of maintaining the home are as follows:
Mortgage interest………… $4,200
Property taxes ………………. 700
Insurance………………….. 1,200
Utilities……………………. 3,200
Repairs…………………….. 1,900
Depreciation………………. 5,500
a. What is the proper tax treatment of this information on their tax return using the Tax Court method?
b. Are there options available for how to allocate the expense between personal and rental use? Explain.
c. What is the proper tax treatment of the rental income and expenses if Matt and Marie rented the house for only 14 days?