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

question 73

Essay

Mike owns a house that he rents out for $1,000 per month.His expenses for the 2017 tax year are as follows:
Mike bought the property in September of 2008,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:

Shaping

A method of teaching new behaviors by rewarding closer and closer approximations to the desired behavior.

Acquiring

The process of obtaining or gaining possession of something.

Cognitive-Behavioral Therapy

A psychotherapeutic approach that aims to solve problems concerning dysfunctional emotions, behaviors, and cognitions through a goal-oriented, systematic process.

Systematic Desensitization Therapy

Type of behavior therapy that attempts to reduce client anxiety through relaxation techniques and progressive exposure to feared stimuli.