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Exam 14: Tax Consequences of Home Ownership

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Question 21

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Tyson owns a condominium near Laguna Beach, California. In 2020, he incurs the following expenses in connection with his condo: (Round your intermediate and final answer to whole number.) During the year, Tyson rented the condo for 100 days, receiving $33,000 of gross income. He personally used the condo for 60 days. Assume Tyson uses the Tax Court method of allocating expenses to rental use of the property. Tyson itemizes deductions, and the sum of his itemized deduction for non-home business taxes and the real property taxes allocated to rental use of the home is less than $10,000. What is Tyson's net rental income for the year (assume this is not a leap year)?

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Question 22

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Alison Jacobs (single)purchased a home in Las Vegas, Nevada, for $470,000. She moved into the home on September 1, year 0. She lived in the home as her primary residence until July 1 of year 4, when she sold the home for $799,000. If Alison's tax rate on long-term capital gains is 15percent, what amount of tax will Alison pay on the $329,000 gain?

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Question 23

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The longer a taxpayer plans on living in a home without refinancing the taxpayer's mortgage on the home, the more likely it is that paying points to receive a reduced interest rate on the loan makes economic sense.

Alfredo is self-employed and he uses a room in his home as his principal place of business. He meets clients there and doesn't use the room for any other purpose. The size of his home office is 600 square feet. The size of his entire home is 3,000 square feet. During the current year, Alfredo received $10,000 of gross income from his business activities, and he reports $7,500 of business expenses unrelated to his home office. For his entire home, he reported $10,000 of mortgage interest, $2,000 of property taxes, $2,500 of home operating expenses, and $4,500 of depreciation expense.Alfredo itemizes deductions, and the sum of his itemized deduction for non-home business taxes and the real property taxes allocated to business use of the home is less than $10,000. What amount of home office expenses is Alfredo allowed to deduct in the current year? (Assume he uses the actual expense method of computing home office expenses.)Indicate the amount and type of expenses he must carry over to next year, if any.

Ilene rents a property for the entire year. During the year, Ilene reported a net loss of $18,700 from the rental. If Ilene is an active participant in the rental and her AGI is $141,000, how much of the loss can she deduct against ordinary income in the year?

A married couple filing a joint tax return is eligible to exclude up to $500,000 of gain realized on the sale of a personal residence if both spouses meet the ownership test and at least one spouse meets the use test.

The tax law places a fixed dollar limit on the amount of home mortgage interest a taxpayer may deduct in a particular year.

For tax purposes a dwelling unit is a residence if the taxpayer's number of personal-use days of the unit is more than 10 days.

Ethan (single) purchased his home on July 1, 2010. He lived in the home as his principal residence until July 1, 2017, when he moved out of the home, and rented it out until July 1, 2019, when he moved back into the home. On July 1, 2020, he sold the home and realized a $210,000 gain. What amount of the gain is Ethan allowed to exclude from his gross income?

A self-employed taxpayer reports home office expenses as for AGI deductions while employees report home office expenses as from AGI deductions.

Careen owns a condominium near Newport Beach in California. This year, she incurs the following expenses in connection with her condo: (Round your intermediate and final answer to whole number.) During the year, Careen rented the condo for 90 days, receiving $20,000 of gross income. She personally used the condo for 50 days. Careen itemizes deductions, and the sum of her itemized deduction for non-home business taxes and the real property taxes allocated to business use of the home is less than $10,000. Assume Careen uses the IRS method of allocating expenses to rental use of the property. What is Careen's net rental income for the year?

Jamison is self-employed and he works out of an office in his home. Jamison itemizes his deductions, and the sum of his itemized deduction for non-home business taxes and the real property taxes allocated to business use of the home is less than $10,000. After allocating the home-related expenses between the business office and the rest of the home, which of the following statements regarding the sequence of deductibility of the expenses allocated to the home office business use is correct? (Jamison does not use the simplified method for determining the home office expense deduction.)

A personal residence is not a capital asset.

Which of the following statements regarding the home mortgage interest expense deduction is correct?

Which of the following statements regarding home-related transactions is correct?

Which of the following statements regarding personal and/or rental use of a home is false?

What is the maximum amount of gain on the sale of principal residence a married couple may exclude from gross income?

A taxpayer who purchases real property during the year is allowed to deduct the property taxes on that property for the entire year in which the property was purchased.

Michael (single) purchased his home on July 1, 2010. He lived in the home as his principal residence until July 1, 2018, when he moved out of the home, and rented it out until July 1, 2019, when he moved back into the home. On July 1, 2020, he sold the home and realized a $300,000 gain. What amount of the gain is Michael allowed to exclude from his 2020 gross income?

Kristen rented out her home for 10 days during the year for $5,000. She used the home for personal purposes for the other 355 days. She allocated the following home expenses to the rental use of the home: Kristen's AGI is $120,000 before considering the effect of the rental activity. What is Kristen's AGI after considering the tax effect of the rental use of her home?