Mike Owns a House That He Rents Out for $1,000

question 27

Essay

Mike owns a house that he rents out for $1,000 per month.His expenses for the 2018 tax year are as follows: $$\begin{array} { l r } \text { Real estate taxes } & \$ 1,300 \\\text { Mortgage interest } & 4,400 \\\text { Insurance } & 600 \\\text { General repairs } & 640\end{array}$$ Mike bought the property in September of 2009, and his basis for depreciation on the house is $137,500.He uses straight-line depreciation with a 27 ½-year life, so the depreciation on the house is $5,000.Mike does not use a property manager and handles all aspects of the rental activity himself.
a.Calculate Mike's net income or loss from renting the house if his gross rental income is $12,000 ($1,000 × 12 months).
b.Is the income or loss on Mike's rental considered to be active, passive, or portfolio income?

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Definitions:

Problem Of Transformation

The challenge of understanding and modeling how input or information can be transformed into a different or more useful form, often discussed in cognitive psychology and artificial intelligence.

Ill-Defined Problem

A problem that lacks clear goals, pathways, or constraints, making it difficult to determine the solution.

Arrangement

The act of organizing or arranging objects, ideas, or elements in a particular order or pattern.

Lexical Analysis

The process of converting a sequence of characters into a sequence of tokens, a fundamental phase in the compilation of programming languages.