Sherrys net income or loss from the vacation home this tax year

7 Oct No Comments

Sherry rents her vacation home for 6 months and lives in it for 6 months during the year.  Her gross rental income during the year is $4,000.  Total real estate taxes for the home are $950, and interest on the home mortgages is $3,000.  Annual utilities and maintenance expenses total $1,800, and depreciation expense is $4,500.  Calculate Sherry’s net income from the vacation home for this tax year.

$4,000.00gross income

1,975.00Less: interest and taxes (50%)

2,025.00Balance

900.00Less: utilities and maintenance

1,125.00Balance

1,125.00Less: Depreciate

$0.00Net incomes

Walter, a single taxpayer, purchased a limited partnership interested in a tax shelter in 1985.  He also acquired a rental house in 2009, which he actively manages.  During 2009, Walter’s shares of the partnership’s losses were $30,000, and his rental house generated $20,000 in losses.  Walter’s modified adjusted gross income before passive losses in $120,000.

 

a. Calculate the amount of Walter’s allowable deduction for rental house activities for 2009

We have $120,000 – $20,000(amount over AGI of $100,000)

Then we deduct up to $25,000 of rental property losses against other income, if they are actively involved in the management of the property and their income does not exceed certain limits

($25,000 – 50% of $20,000) which equals $15,000; this is the amount that Walter is able to deduct.

b. Calculate the amount of Walter’s allowable deduction for the partnership losses for 2009.

Kind of confused on this one but here is my best shot, assuming it is calculated the same as A.

$25,000

– (50% of 30,000)

= $10,000 deductable

c. What may be done with the unused losses, if anything?

Any unused passive losses and credits are carried over and may be used to offset future passive income or taxes attributable to such income.

Carried loaned her friend $4500 to buy a used car.  She had her friend sign a note with repayment terms and set a reasonable interest rate on the note because the $4,500 was most of her savings.  Her friend left town without a forwarding address, and nobody Carrie knows has heard from her in the last year.  How should Carrie treat the bad loan for tax purposes?

This is a non-business bad debt, since this was a personal that Carrie gave out and not for a business. Therefore $3000 in short-term capital loss can be claimed this year.  The leftover $1500 can be carried forward and claimed next year. Basically if someone owes you money that you cannot collect, you may have a bad debt.

What is the maximum amount a 45-year-old taxpayer and 45-year-old spouse can put into a Traditional or Roth IRA for 2009 (assuming they have sufficient earned income, but do not have an income limitation and are not covered by another pension plan)?

If you are single, head of household or married filing separately, your contribution limit of $5,000 begins to phase out when your modified AGI reaches $105,000 and is zero beginning at $120,000. If you are married, filing jointly, or a qualified widow or widower, your contribution limit of $5,000 begins to phase out when your modified AGI reaches $167,000 and is zero beginning at $177,000.

So since they don’t have an income limitation and are not covered by another pension plan, they both should be able to contribute $5,000 for a combined result of $10,000 to a Roth IRA.




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