contain viruses. Unless you need to edit, it's safer to stay in Protected View Enable Editing 39. Sarah and Kurtown a second home in the mountains. They rent the home to unrelated parties for 8 weeks (56 days) during the year. Sarah and Kurt used the house 12 days for their vacation during the year. After properly dividing and allocating the expenses between rental and personal use, it was determined that a rental loss was incurred on the home as follows: $8,000 Gross rental income Less: Mortgage interest and property taxes Other allocated expenses Net rental loss $7,000 2,500 (9,500) ($1.500) What is the correct treatment of the rental income and expenses on Sarah and Kurt's joint income tax return for the current year? (Use the IRS approach if applicable) a. The $1.500 loss may be deducted. b. Only the mortgage interest and property taxes should be deducted. c. Since the house was used for personal purpose for more than 10% of total days rented, the rental expenses are limited to the gross rental income d. Since the house was used less than 50% personally, all expenses allocated to personal use may be deducted. c. Sarah and Kurt should include none of the income or expenses related to the beach house in their current year income tax return. 40. Diane relaxes by painting in her spare time. Her painting is considered a hobby. During 2019 she sold several paintings for $8,000. She incurred deductible expenses as follows: Supplies $6,000 Insurance 1,500 Advertising 500 Rent 4,000 Assuming the activity is a hobby, how should she report these items on her tax retum? a. Include $8,000 in income and deduct $11,000 for AGI. b. Ignore both income and expenses since hobby losses are disallowed. c. Include $8,000 in income and deduct $8.000 for AGI. d. Include $8,000 in income and deduet $0. e. None of these