Claire and Harry Own a House on Hilton Head Island

question 38

Multiple Choice

Claire and Harry own a house on Hilton Head Island.During the year,Claire and Harry rent the house for 30 days to friends from Texas for $2,000.Claire and Harry use the house a total of 60 days during the year.After making the appropriate allocation of expenses between personal and rental use,the following rental loss was determined:
$$\begin{array} { l r } \text { Rental income } & \$ 2,000 \\\text { Property taxes } & ( 250 ) \\\text { Mortgage interest } & ( 950 ) \\\text { Repairs and maintenance } & ( 200 ) \\\text { Utilities } & ( 300 ) \\\text { Depreciation } &\underline { ( 400 ) }\\\text { Rental loss } & \$ ( 100 ) \end{array}$$
How should Claire and Harry report the rental income and expenses for the forthcoming year?
I.Report the $100 loss for AGI.II.Only expenses up to the amount of $2,000 rental income may be deducted for the year.
III.Include the $2,000 in gross income,but no deductions are allowed.
IV.Nothing needs to be reported.

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Statements II and III are correct.
• D)Statements III and IV are correct.
• E)Statements I and III are correct.

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Definitions:

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A widespread feeling of fear, often an irrational one, that some evil threatens the well-being of society, usually stirred up by media and politicians.

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