Tom and RoseMary Own a Cabin near Stowe,Vermont How Should Tom and RoseMary Report the Rental Income and Year

question 7

Multiple Choice

Tom and RoseMary own a cabin near Stowe,Vermont.During the current year the cabin is rented for 31 days for $1,800.Tom and RoseMary used the cabin a total of 12 days during the year.After making the appropriate allocation of expenses between personal and rental use,the following rental loss was determined:
$$\begin{array} { l r } \text { Rental income } & \$ 1700 \\\text { Property taxes } & ( 150 ) \\\text { Mortgage interest } & ( 950 ) \\\text { Repairs and maintenance } & ( 400 ) \\\text { Utilities } & ( 300 ) \\\text { Depreciation } & \underline { ( 200 ) } \\\text { Rental loss } & \underline { \$ ( 300 ) }\end{array}$$
How should Tom and RoseMary report the rental income and expenses for the current year?

• A)Include the $1,700 in gross income, but no deductions are allowed.
• B)Report the $300 loss for AGI.
• C)Only expenses up to the amount of $1,700 rental income may be deducted in the current year.
• D)Report the interest ($950) and taxes ($150) as itemized deductions and the other expenses for AGI.
• E)No reporting for the rental activity should be reported.

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Definitions:

Transfer Price

The price charged for goods or services sold between departments or subsidiaries within the same company.

Pump Division

A segment within a company that specializes in the production, sale, and maintenance of pump equipment.

Pool Products Division

A specific division within a company that focuses on the development, production, and sales of products related to swimming pools, such as pool chemicals, filters, and equipment.

Transfer Prices

The prices at which services, goods, or capital are exchanged between divisions within the same company, often used for accounting and tax purposes.