1. Tommy and Prudence own a cottage on Chippewa Lake. They incur the following expenses with respect to this property during 2019:

$4,000 in Property Taxes

$7,200 in Mortgage Interest

$3,600 in Utilities and Insurance

If relevant, tax depreciation would be $1,200 annually (20 points)

Scenario 1

The cottage is rented out for $100/day for a total of 14 day, so a total of $1,400 rent revenue.

Required: Determine the amount of costs that can be deducted in arriving at Adjusted Gross Income

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Scenario 2

The cottage is used 14 days personally and is rented out for 126 days at $100/per day.

Required: Determine the amount of costs that can be deducted in arriving at Adjusted Gross Income, assuming the IRS method of allocation is utilized.

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Scenario 3

The cottage is used 30 days personally and is rented out for 70 days at $100/day.

Required: Determine the amount of costs that can be deducted in arriving at Adjusted Gross Income, assuming the Tax Court method of allocation is utilized.

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