Wilson Owns a Condominium in Gatlinburg,Tennessee AFor Each of the Following Scenarios Indicate Whether Wilson Would

question 105

Essay

Wilson owns a condominium in Gatlinburg,Tennessee.During the current year,she incurs the following expenses before allocation related to the property:
$$\begin{array} { l r } \text { Mortgage interest } & \$ 10,000 \\\text { Property taxes } & 4,000 \\\text { Utilities } & 1,000 \\\text { Maintenance fees } & 1,300 \\\text { Repairs } & 800 \\\text { Depreciation } & 6,000\end{array}$$
a.For each of the following scenarios indicate whether Wilson would treat the condominium for income tax purposes as personal use property, a rental or a vacation home. $$\begin{array} { | c | c | c | c | c | } \hline \text { Case } & \begin{array} { c } \text { Rental } \\\text { Income }\end{array} & \begin{array} { c } \text { Rental } \\\text { Days }\end{array} & \begin{array} { c } \text { Personal } \\\text { Use Days }\end{array} & \begin{array} { c } \text { Personal, } \\\text { rental, or } \\\text { vacation }\end{array} \\\hline \text { A } & \$ 10,000 & 300 & 0 & \\\hline \text { B } & 7,000 & 60 & 10 & \\\hline \text { C } & 15,000 & 60 & 20 & \\\hline \text { D } & 2,000 & 10 &40 & \\\hline \text { E } & 11,000 & 280 &20 & \\\hline\end{array}$$
b.Consider Case C. Determine Wilson's deductions related to the condominium. Indicate the amount of each expense that can be deducted and how it would be deducted.

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Definitions:

Gain on Realization

Profit recognized from selling an asset for more than its book value.

Loss or Gain

The financial result from business transactions, investments or other financial events, indicating a profit (gain) or a deficit (loss).

Realization Account

An account used in the process of dissolving a partnership or corporation, where the assets are converted into cash and liabilities are paid off.

Post-closing Account Balances

The balances of all ledger accounts after adjusting entries have been made and temporary accounts have been closed out at the end of an accounting period.