Question

Mike and Pam own a cabin near Teluride, Colorado. In the current year, the cabin was rented for 8 days to friends. Mike and Pam used the cabin a total of 82 days during the same year. After allocating the expenses between personal and rental use, the following rental loss was determined:

Rental income
$700

Property taxes
(250)

Mortgage interest
(300)

Repairs and maintenance
(100)

Utilities
(150)

Rental loss
$(100)

How should Mike and Pam report the rental income and expenses for last year?

Answer 1

Mike and Pam should report the rental income of $700 and deduct the expenses such as property taxes, mortgage interest, repairs and maintenance, and utilities. After deducting the expenses, they have a rental loss of $100.

Step-by-step explanation:

Mike and Pam should report the rental income and expenses as follows:

• Rental income: $700
• Property taxes: -$250
• Mortgage interest: -$300
• Repairs and maintenance: -$100
• Utilities: -$150
• Rental loss: -$100

They should report the rental income of $700 and deduct the expenses of property taxes, mortgage interest, repairs and maintenance, and utilities. After deducting these expenses, they have a rental loss of $100.