7. During the year, Martin rented his vacation home for three months and spent one month there (You may assume all month are 30 days and the year is 365 days). Gross rental income from the property was $5,000. Martin incurred the following expenses: mortgage interest, $3,000 real estate taxes, $1,500 utilities, $800 maintenance, $500 and depreciation, $4,000. Compute Martins allowable deductions for the vacation home under the IRS's approach.

How would the court's approach differ?

8. Agnes operates a Christmas shop in Atlantic City, NJ. She makes a weekend trip to Vero Beach, FL, for the purpose of determining the feasibility of opening another shop. Her travel expenses are $2,000 (includes $500 for meals). In addition, she pays $5,000 to a market research firm in Vero Beach to prepare a feasibility study. Determine the amount of the expenses that Agnes can deduct if:

a. She opens a new shop in Vero Beach.

b. She decides not to open a new shop in Vero Beach.