Suzanne owns a vacation home at the beach in which she lived for 30 days and rented out for 61 days during the current year. Her gross rental income is $2,600. Her total expenses for the vacation home are as follows:
Mortgage interest..................................$1,500
Property taxes..........................................900
Utilities..................................................700s
Maintenance...........................................300
Depreciation for entire house 1,100
a. Compute Suzanne's net rental income using the IRS method for allocating expenses.
b. Compute Suzanne's net rental income using the Tax Court method (also known as the Bolton method) for allocating expenses.
c. Which method results in less taxable income? Explain.