Exam 8: Rental Property, royalties, and Income From Flow-Through Entities Line 17, form 1040, and Schedule E

A personal/rental property that is not a trade or business)may report its income and expenses on Schedule A.

Jeremy and Gladys own a cabin in Sun Valley,Idaho,which they rented for 30 days.They also used the cabin with their family and friends for the ski season for 45 days.Their income and expenses were as follows: rental income $4,000,mortgage interest $3,000,property taxes $2,200,utilities $400,maintenance $400,and depreciation $4,800.How much depreciation expense can they deduct on Schedule E for the cabin? Use the IRS method for allocation of expenses.

Which of the following expense items isare)deductible as rental expense?

Royalties can be earned from allowing others the right to use:

If a tenant pays an expense normally paid by the taxpayer landlord)in lieu of rent or the full rent),that expense is not considered part of rental income to the taxpayer.

A royalty is a payment for the right to use intangible property.

Rental activities by definition are passive activities.

Explain what is considered personal use of a rental property.

Meredith has a vacation rental house in the Sierra Mountains.During the year,she and her immediate family used the house for 12 days for a personal vacation.Meredith spent two more weekends 4 days in total)repairing the deck.The house was rented for 120 days.How should the cabin be categorized this year for tax purposes? Explain your answer.

In general,losses from passive activities may be deducted only to the extent that there is passive income.

Eddie and Camilla received $11,600 for the rental of their rental house in Irvine,California.Eddie and Camilla do not use this property for personal use.The rent covers six months from October 1 of the current year to March 31 of next year.The amount also includes a security deposit of $2,000.How much should Eddie and Camilla report as rental income in the current tax year?

What is the proper tax treatment of capital improvements for a residential or commercial rental property?

A security deposit for a rental property is not reported as income.

Darlene is a full-time author and recently published her third romance novel.The royalty income she receives from the publisher this year should be reported on what schedule?

Jennifer's beach house,rented for 175 days and used by her and her family for 15 days,is considered personal/rental property.

Julian and Nina own a home in Napa Valley,California,and rented it for 14 days for $10,000 to a large corporation.The rest of the year,they lived in the home.What is the proper tax treatment of the $10,000 they received?

Royalty income is income received from the use of books,stories,plays,copyrights,trademarks,etc.owned by the taxpayer.

Hugh and Mary own a cabin in Big Bear that they rented for 45 days at $4,500.They used the cabin for personal use for 30 days during the year.The allocated expenses related to the cabin of $6,000 resulted in a net loss of $1,500 for this rental activity.What is the proper tax treatment of these amounts by Hugh and Mary?

What is meant by a passive activity? Why is a rental activity classified as a passive activity? Can a rental activity be classified as active? Explain.

When royalties are paid,the amount paid is reported to the recipient by the payer at the end of the year on a Schedule K-1.