Question
Kyle purchased a large lot on a lake in anticipation of building his home there within 3 years. In the current year, Kyle paid $650
Kyle purchased a large lot on a lake in anticipation of building his home there within 3 years. In the current year, Kyle paid $650 in property taxes and $2,500 of interest on the demand loan he obtained to purchase the lot. January to March he rented out the lot to a local snowmobile club for $1,500. The amount charged is chosen to allow Kyle to recover some of his costs. Which of the following statements is correct? (Canada)
a. Kyle cannot deduct any of the property taxes or interest paid for the vacant lot. (This is the correct answer but I want to know why and how)
b. Kyle can deduct all of the property taxes and interest paid.
c. Kyle can deduct the $650 of property taxes paid and $850 of the interest paid
d. Kyle can deduct the $650 of property taxes paid, but none of the interest paid.
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