Acc 307 HW

Ch 14

1. Celia has been married to Daryl for 54 years. The couple has lived in their current home for the last 20 years. In October of year 0, Daryl passed away. Celia sold their home and moved into a condominium. What is the maximum exclusion Celia is entitled to if she sells the home on December 15 of year 1?

Maximum exclusion entitled

2. Troy (single) purchased a home in Hopkinton, Massachusetts, on January 1, 2007, for $290,000. He sold the home on January 1, 2019, for $312,700. How much gain must Troy recognize on his home sale in each of the following alternative situations?

a. Troy rented out the home from January 1, 2007, through November 30, 2008. He lived in the home as his principal residence from December 1, 2008, through the date of sale. Assume accumulated depreciation on the home at the time of sale was $12,500.

Recognized gain

b. Troy lived in the home as his principal residence from January 1, 2007, through December 31, 2014. He rented out the home from January 1, 2015, through the date of the sale. Assume accumulated depreciation on the home at the time of sale was $6,950.

Recognized gain

c. Troy lived in the home as his principal residence from January 1, 2007, through December 31, 2016. He rented out the home from January 1, 2017, through the date of the sale. Assume accumulated depreciation on the home at the time of sale was $0.

Recognized gain

d. Troy rented out the home from January 1, 2007, through December 31, 2014. He lived in the home as his principal residence from January 1, 2015, through December 31, 2015. He rented out the home from January 1, 2016, through December 31, 2016, and lived in the home as his principal residence from January 1, 2017, through the date of the sale. Assume accumulated depreciation on the home at the time of sale was $0

Recognized gain

3. Lewis and Laurie are married and jointly own a home valued at $244,000. They recently paid off the mortgage on their home. The couple borrowed money from the local credit union in January of 2019. How much interest may the couple deduct in each of the following alternative situations?

a. The couple borrows $44,000, and the loan is secured by their home.  The credit union calls the loan a “home equity loan.” Lewis and Laurie use the loan proceeds for purposes unrelated to the home.The couple pays $2,000 interest on the loan during the year, and the couple files a joint return.

Deductible interest expense

b. The couple borrows $118,000, and the loan is secured by their home. The credit union calls the loan a “home equity loan.” Lewis and Laurie use the loan proceeds to add a room to their home. The couple pays $5,400 interest on the loan during the year, and the couple files a joint return

Deductible interest expense

4. Jenae and Terry Hutchings own a parcel of land as tenants by entirety. That is, they both own the property but when one of them dies the other becomes the sole owner of the property. For nontax reasons, Jenae and Terry decide to file separate tax returns for the current year. Jenae paid the entire $3,400 property tax bill for the land. How much of the $3,400 property tax payment is each spouse entitled to deduct in the current year assuming they pay no other deductible taxes during the year?

Property taxes deductible by Jenae

Property taxes deductible by Terry

5. Alexa owns a condominium near Cocoa Beach in Florida. This year, she incurs the following expenses in connection with her condo:  

Insurance	$	3,500
Mortgage interest		10,800
Property taxes		3,700
Repairs & maintenance		1,150
Utilities		2,900
Depreciation		22,000

During the year, Alexa rented out the condo for 132 days. She did not use the condo at all for personal purposes during the year. Alexa’s AGI from all sources other than the rental property is $200,000. Unless otherwise specified, Alexa has no sources of passive income. Assume that in addition to renting the condo for 132 days, Alexa uses the condo for 8 days of personal use. Also assume that Alexa receives $44,500 of gross rental receipts and her itemized deductions exceed the standard deduction before considering expenses associated with the condo. Answer the following questions:

Note that the home is considered to be a nonresidence with rental use.

a. What is the total amount of for AGI deductions relating to the condo that Alexa may deduct in the current year? Assume she uses the IRS method of allocating expenses between rental and personal days. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)

Gross rental

Expenses

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Total Expenses

Balance Net rental income

b. What is the total amount of from AGI deductions relating to the condo that Alexa may deduct in the current year? Assume she uses the IRS method of allocating expenses between rental and personal days.

From AGI deductions

c. Would Alexa be better or worse off after taxes in the current year if she uses the Tax Court method of allocating expenses?

Better off

Worse off