On January 1, 2016 you closed escrow on a ten unit apartment building in North Hollywood, CA . It was built in 1952. You paid $1,062,000.00 (for this problem, this figure includes capitalized buyer closing costs discussed in Chapter 17.2). The tax bill for $13,275 reflects the assessors determination that the land was valued at 25% of the cost and the improvements at 75% of the purchase price (Use these percentages/ratios to calculate first year depreciation).

Your gross scheduled income is based on 7, 1 bedroom units that rent for $750 per month and 3, 2 bedroom units that rent for $1,000 per month.

The laundry room produces $588 in annual income.

The vacancy/ uncollectible factor is 3%.

Your annual operating expenses for taxes, insurance, gardener, utilities paid by landlord,repairs, trash collection , management, licenses, pest control are 39.67% of gross scheduled income.

Your new trust deed ( first loan) is for $620,000 and has a loan payment is $3919 a month. Your down payment is $442,000.

The interest on the first year of the loan is approximately $43,100.

Your tax bracket is 37.4%.

Your tax adviser has informed you all passive losses are usable in the current year. ________