Homeowners purchased their vacation residence for $180,000 ($20,000 of which was allocable to the land). When it was worth $160,000 ($20,000 of which was allocable to the land), they moved out and put it up for sale, but not rent, for $170,000.

(a) May they take deductions for expenses and depreciation on the residence? If so, what types of expenses would qualify?

(b) Assume instead that they rented the property and properly took $10,000 of depreciation on it. What result when they subsequently sell the property for:

$145,000?

$175,000?

$165,000?

(c) What result in (b)(2), above, if the property had been Homeowners principal residence, they had owned and used it for 4 of the prior 5 years, and the depreciation was taken after 1997?