Charles and Sarah Own a Home in Palm Springs,CA

question 31

Multiple Choice

Charles and Sarah own a home in Palm Springs,CA.During the year,they rented the house for 40 days for $5,000 and used it for personal use for 18 days.The house remained vacant for the remainder of the year.The expenses for the house included $16,000 in mortgage interest,$4,500 in property taxes,$1,000 in utilities,$1,200 in maintenance,and $9,800 in depreciation.What is the deductible loss for the rental of their home (without considering the passive loss limitation) ? Use the Tax Court method for allocation of expenses.

• A)$0
• B)$5,000 net income
• C)$17,414 net loss
• D)$27,500 net loss

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Definitions:

Casting

A manufacturing process where a liquid material is poured into a mold and solidifies to take on a specific shape.

Finishing

is the process of completing the final stages of manufacturing to prepare products for sale, such as painting, polishing, or packaging.

Direct Labor-Hours

The total number of work hours spent by employees who are directly involved in the manufacturing process.

Traditional Costing

An accounting method that allocates overhead costs to products based on a predetermined rate, often labor or machine hours.