wwwPaylesstaxcom
Toll Free (877)CPA-Help or (877)272-4357

Don Fitch CPA's professional services include Guaranteed results with the IRS, tax returns for ALL 50 STATES,  Financial and IRS Audits, Financial Reviews, Compilations, IRS Discovery's, Natural Disaster Relief, Lender Letters, and CPA Employment Verification

Vacation Home

CODE SECTION 280A: PLANNING CONSIDERATIONS

Before the Tax Reform Act of 1986, planning under Code Section 280A was
relatively straightforward. An owner of a dwelling unit used as a
residence generally benefited by using the Bolton method to allocate
interest and taxes because it allocates lower amounts of these items to
the rental, making it possible to take larger deductions for other
operating expenses. This was advantageous because the remaining amount of
taxes and interest allocated to personal use was deductible as an itemized
deduction. For an explanation of how expenses are allocated to rental use
and the adoption by the Tax Court of the Bolton method in Bolton v.
Commissioner, 77 T.C. 104 (1981), see Section 82.5

If the dwelling unit was not used as a residence, the owner was generally
indifferent as to which allocation method to use because all expenses
allocable to rental use were deductible in any event. The number of
residences owned by a taxpayer also had no effect on planning.

The 1986 Act made planning much more complicated for several reasons.
First, Code Section 163 was amended to limit the deduction for mortgage
interest to two homes. Code Section 163(h)(4)(A)(i)(II). <31> Second,
the $1 million overall limit on qualified residence indebtedness could
eliminate the deduction for mortgage interest on any vacation home. Code
Section 163(h)(3)(B)(ii). In addition, Code Section 469 generally
prevents losses from rental property from being deducted against other
income, but certain offsets and exceptions permit a deduction in certain
circumstances. <32> Thus, the owner of a dwelling unit that was not used
as a residence during the taxable year is no longer indifferent to the
method of allocation. Indeed, at times the taxpayer may now be better off
using the dwelling as a residence.

One fortunate aspect of the 1986 Act changes is that the passive activity
rules and the qualified residence definition for the interest deduction
are based on the Code Section 280A definition of a dwelling unit used as
a residence. Under the passive activity rules, if Code Section 280A
applies to any activity involving the use of a dwelling unit, the
activity will not be eligible for the Code Section 469(j)(10) benefit,
which allows these losses to be offset against passive activity income
indefinitely. For interest purposes, the definition of a qualified
residence includes the taxpayer's principal residence and one other
residence of the taxpayer that is used as a residence "within the meaning
of Section 280A." Code Section 163(h)(4)(A)(i)(II).

Thus, the three sets of rules mentioned above use the same dividing line,
and the planning choices a taxpayer faces are based on whether it is more
advantageous to be on the rental or residence side of the line.


(a) EFFECT OF THE LIMITS ON INTEREST DEDUCTIONS

Mortgage interest paid on a second home (i.e., any residence other than
the taxpayer's principal residence) is fully deductible only if the home
meets the requirements of a qualified residence, and the owner elects to
treat it as such. Code Section 163(h)(4)(A)(i)(II).

Because "qualified residence" is defined by reference to Code Section
280A (Code Section 163(h)(4)(A)(i)(II)), a dwelling cannot be a qualified
residence unless there has been sufficient personal use to cause it to be
considered a dwelling used as a residence, i.e., the personal use exceeds
the greater of 14 days or 10 percent of the number of fair rental days.
Taxpayers who own more than two eligible dwellings can alternate their
selection of the second residence among their homes in order to maximize
the interest deduction. In addition, a taxpayer who does not actually
rent a dwelling at any time during a taxable year may select that
dwelling as the second qualified residence. Code Section
163(h)(4)(A)(iii).

Mortgage interest allocable to the personal use of a vacation home that is
not a qualified residence is considered consumer interest, which is not
deductible. Code Section 163(h). Interest allocable to rental use is not
considered consumer interest. This interest will be a passive activity
deduction if the rental activity is subject to Code Section 469. If not
subject to Code Section 469, the interest will be investment interest or
trade or business interest.

The 1986 Act also placed a $1 million limit on the amount of qualified
residence indebtedness ($1 million of acquisition indebtedness (Code
Section 163(h)(3)(B)(ii)) and $100,000 of home equity indebtedness (Code
Section 163(h)(3)(C)(ii))). For example, if a taxpayer's principal
residence was encumbered by a purchase money mortgage of $1.2 million,
and a second mortgage of $200,000 was used to refinance other debts, no
interest attributable to any other residence would be deductible.
Therefore, Bolton will no longer be the automatic choice because interest
allocated to personal use may no longer be deductible as an itemized
deduction, and Code Section 469 may disallow a loss. The question arises
as to whether the taxpayer may select the Bolton method for allocating
taxes and the IRS method for allocating interest. The best answer is that
the method selected by the taxpayer must be used consistently with
respect to the same property both within the year and over years. A
different method may not be selected for the allocation of interest than
the one used for the allocation of taxes with respect to the same
property.


(b) EFFECT OF THE PASSIVE LOSS RULES

Planning for the passive loss rules first involves the issue of whether
Code Section 469 will apply to a dwelling if it is not used as a
residence within the meaning of Code Section 280A. If Code Section 469
applies, losses from the rental activity may not be used to offset income
from non-passive sources, including salary, business income, and
portfolio income, such as interest, dividends, and royalties. Code
Section 469(a)(1). Passive losses can be deducted only against other
passive income. A loss that cannot be deducted currently is suspended
until there is sufficient passive income or the taxpayer disposes of her
entire interest in the property.

If Code Section 469 applies, however, a taxpayer may nevertheless be
better off than if Code Section 280A applies. An exception to the general
passive loss limitations allows individuals to use up to $25,000 of
losses from rental real estate activities to reduce other income if the
individual actively participates in management of the rental. Code
Section 469(i). The $25,000 allowance is reduced (but not below zero) by
50 percent of the amount by which the taxpayer's adjusted gross income
for the year exceeds $100,000. Code Section 469(i)(3).

If Code Section 280A does not apply, it is possible that Code Section
469 will not apply. "Passive activity" is defined to include any rental
activity without regard to whether or to what extent the taxpayer
participates in the activity. Code Section 469(c)(2) and Code Section
469(c)(4). An activity is not a rental activity for a taxable year if the
average period of customer use for the property is seven days or less.
Reg. Section 1.469-1T(e)(3)(ii)(A). <33> Thus, if a
taxpayer rents a vacation home at a fair rental for a total of 70 days to
14 different customers during the year, the average rental period is five
days, and the activity is not considered a rental activity.

This exception to the automatic application of Code Section 469 to rental
activities is a two-edged sword. If the taxpayer materially participates,
the activity is not a passive activity and the entire loss generated from
the activity is deductible. If the taxpayer does not materially
participate, however, the passive activity rules will apply, and
moreover, the $25,000 offset will not be available because it applies
only to rental activities.


(c) PLANNING FOR LOSS PROPERTY

For loss property, the planning variables include whether the dwelling is
used as a residence, whether Code Section 469 would limit the deduction
of the loss (if the dwelling is not used as a residence), and the choice
between the IRS and Bolton methods of allocating interest and taxes.

If the dwelling is used as a residence, Code Section 469 will not apply
and Code Section 280A will limit deductions to gross income. The Bolton
method generally will maximize current year tax benefits by increasing
the itemized deduction for interest and taxes. The amount of loss carried
forward will be reduced by the same amount, but it is generally to the
taxpayer's advantage to trade a carryforward for a current deduction.

EXAMPLE 8: John and Theresa own a lakefront house in a resort
community. During the current year, they use the house for personal
purposes for 30 days and rent it for fair rental for 250 days,
generating $15,000 of rental income. They incur $22,500 of expenses,
detailed below. The following will result if the Bolton method is
used to allocate interest and taxes:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------
Rental Income $15,000 $15,000
Interest 10,000 $3,151 (6,849) Bolton
Taxes 2,000 630 (1,370) Bolton
Utilities 3,500 $375 (3,125) 280A(e)(1)
Miscellaneous 2,000 214 (1,786) 280A(e)(1)
Depreciation 5,000 536 (1,870)* 280A(e)(1)
-------
Net Rental Income $ 0
=======

* Loss carryover attributable
to the disallowed portion of
depreciation $ 2,594
=======

Itemized deductions $ 3,781
=======


If they use the IRS method, the following results:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------

Rental Income $15,000 $15,000
Interest 10,000 $1,071 (8,929) 280A(e)(1)
Taxes 2,000 214 (1,786) 280A(e)(1)
Utilities 3,500 $375 (3,125) 280A(e)(1)
Miscellaneous 2,000 214 (1,160)* 280A(e)(1)
Depreciation 5,000 536 ( 0)* 280A(e)(1)
-------
Net Rental Income $ 0
========

* Loss carryover attributable
to the disallowed portion of
miscellaneous expenses ($626)
and depreciation ($4,464) $ 5,090
=======

Itemized deductions $ 1,285
=======


In both cases, any loss attributable to the rental use of the house
is disallowed, but may be carried forward. By using the IRS method,
John and Theresa have a loss carryover of $5,090. Using the Bolton
method, they have a loss carryover of $2,594. However, using the
Bolton method, they have current itemized deductions of $3,781 for
interest and taxes, compared to $1,285 if the IRS method is used.
Thus, if a taxpayer is using a vacation home as a residence, it is
advantageous to use the Bolton method to allocate interest and taxes.

If the dwelling is not used as a residence, the IRS method will generally
be the better choice because the interest allocated to personal use will
be non-deductible consumer interest (because only residence interest is
deductible). The IRS method allocates less interest to personal use.

This benefit, however, is not cost free. First, since interest and taxes
probably must be allocated using the same method, less tax -- which is
deductible in full as an itemized deduction -- will be allocated to
personal use and more to rental use, which may increase a non-deductible
loss. Thus, in order to save a part of the interest deduction, some of the
current deduction for taxes may be lost. However, it is still the better
choice in the typical situation in which interest expenses are
significantly larger than taxes.

If Code Section 469 applies, either because of the rental activity rule
or because the taxpayer does not materially participate, the loss will be
disallowed as a current deduction (unless the taxpayer has passive
income, in which case the analysis will be the same as if Code Section
469 does not apply). Thus, the choice of the IRS method would generate
only a mild benefit -- an exchange of disallowed interest for a larger
suspended loss to be claimed in some future year, at the cost of a
reduced current deduction for taxes also exchanged for a larger suspended
loss.

If Code Section 469 does not limit the current deduction of the loss,
either because the rental activity rule does not apply and the taxpayer
does materially participate, or because the $25,000 setoff for rental
real estate is available, the choice of the IRS method generates a real
benefit.

Any increased amount of interest allocated to rental use will be fully
deductible, as compared to a disallowed personal interest expense. The
full amount of taxes will be deductible irrespective of how they are
allocated.

EXAMPLE 9: If John and Theresa had only 25 personal use days (under
the facts of Example 8), the Bolton method gives the following
results:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------
Rental Income $15,000 $15,000
Interest 10,000 $3,151 (6,849) Bolton
Taxes 2,000 630 (1,370) Bolton
Utilities 3,500 318 (3,182) 280A(e)(1)
Miscellaneous 2,000 182 (1,818) 280A(e)(1)
Depreciation 5,000 455 (4,545) 280A(e)(1)
-------

Net Rental Income (loss) $(2,764)
=======

Itemized deductions $ 630
=======


If the IRS method is used to allocate interest and taxes:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------
Rental Income $15,000 $15,000
Interest 10,000 $909 (9,091) 280A(e)(1)
Taxes 2,000 $182 (1,818) 280A(e)(1)
Utilities 3,500 318 (3,182) 280A(e)(1)
Miscellaneous 2,000 182 (1,818) 280A(e)(1)
Depreciation 5,000 455 (4,545) 280A(e)(1)
-------

Net Rental Income (loss) $(5,454)
=======

Itemized deductions $ 182
=======


The IRS method generates a loss of $5,454, and itemized deduction for
taxes of $182, and disallowed personal interest of $909. The Bolton
method generates a loss of $2,764, and itemized deduction for taxes
of $630, and disallowed personal interest of $3,151. If the loss is
deductible, either because the house is not a rental activity and
John and Theresa materially participate, or because of the $25,000
setoff use of the IRS method is the obvious choice.

If Code Section 469 would not permit a current deduction of the loss
generated, the larger itemized deduction for taxes under the Bolton
method must be weighed against the larger loss carryforward generated by
the IRS method. In this case, John and Theresa should elect the IRS
method, as an additional loss carryforward for $2,690 has a greater value
than $448 of additional current deductions.


(d) PLANNING FOR INCOME PROPERTY

For income property, the same variables must be taken into account as with
loss property: whether the dwelling was used as a residence; whether the
income would be passive income under Code Section 469 ; and whether the
IRS or Bolton method of allocating interest and taxes should be chosen.

If the income property is used as a residence, the taxpayer should be
indifferent to the choice between the IRS and the Bolton allocation
methods in that year because both will generate the same net tax result
(provided interest allocated to personal use is deductible). However,
other factors may influence the choice. If the taxpayer is subject to the
$1 million cap on qualified residence indebtedness or another residence is
selected as the second residence, the IRS method is preferable as it would
allocate less interest to personal use. If the taxpayer expects the
property to generate a loss in the future, the choice should be based on
whether the property is expected to be used as a residence in the loss
year, so that there will be no problem with consistency. Bolton is more
beneficial for a dwelling used as a residence; the IRS method is better
for rental property.

EXAMPLE 10: John and Theresa own a lakefront house. During the
current year, John and Theresa rented the home at fair rental for 250
days, generating $25,000 of rental income. They had 30 days of
personal use. The home is a dwelling used as a residence because
personal use exceeds the greater of 14 days or 10 percent of the
number of fair rental days. Assuming the expenses remain the same as
in Examples 8 and 9, the following results if John and Theresa use
the Bolton method to allocate interest and taxes:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------
Rental Income $25,000 $25,000 Bolton
Interest 10,000 $3,151 (6,849) Bolton
Taxes 2,000 630 (1,370) 280A(e)(1)
Utilities 3,500 $375 (3,125) 280A(e)(1)
Miscellaneous 2,000 214 (1,786) 280A(e)(1)
Depreciation 5,000 536 (4,464) 280A(e)(1)
-------

Net Rental Income $ 7,406
Less: Itemized deductions (3,781)
-------
Taxable net (assumes itemized
deductions allowable) $ 3,625
=======


If John and Theresa use the IRS method, the following results:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------
Rental Income $25,000 $25,000
Interest 10,000 $1,071 (8,929) 280A(e)(1)
Taxes 2,000 214 (1,786) 280A(e)(1)
Utilities 3,500 $375 (3,125) 280A(e)(1)
Miscellaneous 2,000 214 (1,786) 280A(e)(1)
Depreciation 5,000 536 (4,464) 280A(e)(1)
-------
Net Rental Income $ 4,910
Less: Itemized deductions (1,285)
-------
Taxable net (assumes itemized
deductions allowable) $ 3,625
=======


The net rental income will not be considered passive income for
Code Section 469 purposes because the house was used as a
residence and thus is outside Code Section 469 whether
the rental portion generates income or a loss.

Both the IRS and Bolton methods produce the same net results and John
and Theresa will care about the choice between them in the current
year only if the interest allocated to personal use is not
deductible, in which case they should choose the IRS method which
minimizes the amount of interest allocated to personal use.

If the income property is not a dwelling used as a residence, the IRS
method will generally be more beneficial. The IRS method allocates
less interest to personal use, so a larger portion of total expenses
is deductible.

Some costs will weigh against the benefits. If the income would be
treated as passive income, the IRS method allocates to rental use a
larger portion of both interest and taxes, in effect a direct
reduction of passive income against which losses from other passive
activities can be deducted.

In this case, the effect of the use of the IRS method is to convert
an interest deduction that would have been disallowed under the
Bolton method into a suspended loss from another activity, which may
be used only at some point in the future. However, if the income is
not passive income (or if the taxpayer has no passive losses), this
setoff will not occur and the IRS method is clearly preferable.

EXAMPLE 11: Assume the same facts as Example 10, except that John and
Theresa had only 25 days of personal use, Code Section 280A does not
apply, since personal use does not exceed 10 percent
of the number of fair rental days. The following results if the
Bolton method is used:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------
Rental Income $25,000 $25,000
Interest 10,000 $3,151 (6,849) Bolton
Taxes 2,000 $630 (1,370) Bolton
Utilities 3,500 318 (3,182) 280A(e)(1)
Miscellaneous 2,000 182 (1,818) 280A(e)(1)
Depreciation 5,000 455 (4,545) 280A(e)(1)
-------

Net Rental Income $ 7,236
------- Less: Itemized
deductions ( 630)
------- Taxable net
(assumes itemized
deductions allowable) $ 6,606
=======


If the IRS method is used to allocate interest and taxes, the
following results:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------
Rental Income $25,000 $25,000
Interest 10,000 $909 (9,091) 280A(e)(1)
Taxes 2,000 $182 (1,818) 280A(e)(1)
Utilities 3,500 318 (3,182) 280A(e)(1)
Miscellaneous 2,000 182 (1,818) 280A(e)(1)
Depreciation 5,000 455 (4,545) 280A(e)(1)
-------

Net Rental Income (passive income) $ 4,546
Less: Itemized deductions ( 182)
-------
Taxable net (assumes itemized
deductions allowable) $ 4,364
=======


In this situation, where the vacation home is not used as a
residence, the taxpayer is better off using the IRS method since it
results in less personal interest being disallowed ($909) than if the
Bolton method had been used ($3,151).


(e) CHOOSING BETWEEN RESIDENCE AND RENTAL TREATMENT

Often a taxpayer's personal use of a dwelling is close to the threshold at
which it would cause the dwelling to be considered used as a residence.
For example, a ski condominium may have been rented at fair rental 180
days and used for personal purposes twelve days, as of December 15 of the
tax year. The taxpayer plans to use the condominium for personal purposes
for about a week during the holiday season. If the taxpayer stays six
days, for a total of 18 personal use days, the dwelling will not have been
used as a residence in that year. Staying an extra day will cause the
dwelling to have been used as a residence because the 19 days of personal
use exceeds 18 days, 10 percent of the number of fair rental days. In this
type of situation, the well-advised taxpayer can, in effect, elect
residence or rental treatment by using or not using the dwelling for
personal purposes.

Whether or not the property generates income or a loss, treatment of the
dwelling as a rental property generally will be more beneficial if the
taxpayer cannot deduct interest allocated to personal use for another
reason, such as the $1 million cap on qualified residence indebtedness or
because the taxpayer has selected another dwelling as the second qualified
residence. If the interest allocated to personal use is not deductible,
treating the dwelling as a rental property has no cost.

For loss property, the treatment of losses under Code Section 280A and
Code Section 469 has a surface similarity in that both sections disallow
a current deduction and permit the disallowed losses to be carried
forward indefinitely. However, as discussed below, significant
differences do exist.

A passive loss is not always disallowed. If the taxpayer has passive
income and he qualifies for the $25,000 setoff for rental real property
activities in which the taxpayer actively participates, the loss will be
currently deductible in full or in part. Alternatively, the taxpayer may
avoid Code Section 469 entirely if the rental activity rule does not
apply (e.g., because the average rental period is less than seven days),
and the taxpayer materially participates. No similar escape from Code
Section 280A is available.

Losses suspended under Code Section 469 are automatically deductible when
the taxpayer disposes of his entire interest in the activity. Thus, the
taxpayer will benefit from the suspended loss at some point. On the other
hand, losses carried forward after being disallowed under Code Section
280A may never be used because they may be deducted only against income
from that particular property or perhaps against other income under Code
Section 469 in a year in which the dwelling is not used as a residence.
Note that there is not a disposition rule that guarantees the ultimate
use of these losses.

While these differences in the loss rules clearly favor the choice of
rental use over residence, the deduction of qualified residence interest
is a significant countervailing consideration. Interest allocated to
personal use is deductible only if Code Section 280A applies and because
a substantial portion of a year's interest can be allocated to personal
use using the Bolton method. If the taxpayer is in a position to deduct
rental losses currently, either under or outside of Code Section 469,
rental treatment may still be preferable. But if losses will be suspended
under Code Section 469 (perhaps for a significant amount of time), a
large current interest deduction may make residence treatment the better
choice.

EXAMPLE 12: During the current year, Bill and Janice rent a dwelling
unit for 250 days, generating $25,000 of rental income, and have 30
days of personal use. The dwelling unit is used as a residence. Using
the Bolton method, the expense allocation is as follows:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------
Rental Income $25,000 $25,000
Interest 20,000 $6,301 (13,699) Bolton
Taxes 2,000 630 ( 1,370) Bolton
Utilities 3,500 $ 375 ( 3,125) 280A(e)(1)
Miscellaneous 2,000 214 ( 1,786) 280A(e)(1)
Depreciation 10,000 1,071 ( 8,929) 280A(e)(1)
-------
Net Rental Income (loss) $(3,909)
=======

Itemized deductions $ 6,931
=======


If Bill and Janice had only 25 days of personal use, the unit would
not be a residence. Using the IRS method, the expense allocation
would then be as follows:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------
Rental Income $25,000 $25,000
Interest 20,000 $1,786 (18,214) 280A(e)(1)
Taxes 2,000 $179 ( 1,821) 280A(e)(1)
Utilities 3,500 313 ( 3,187) 280A(e)(1)
Miscellaneous 2,000 179 ( 1,821) 280A(e)(1)
Depreciation 10,000 893 ( 9,107) 280A(e)(1)
-------
Net Rental Income (loss) $(9,150)
=======

Itemized deductions $ 179
=======


Thus, Bill and Janice would be better off treating the vacation home
as a residence rather than as rental property because the itemized
deductions of $6,931 (with a disallowed loss of $3,909) are
preferable to the itemized deductions of $179 unless the $9,150 loss
is currently deductible.

For income property, the benefit of treating the property as rental
property is primarily the generation of passive income. If passive income
is not of use to a taxpayer, or if the income from the property would not
be passive income (e.g., because the taxpayer materially participates and
the property is not a rental activity), the taxpayer would be better off
choosing residence treatment to preserve the deduction of the interest
allocated to personal use. However, if the property would generate passive
income if treated as a rental property, the choice is more complicated.
The relative values of the passive income and the deduction for interest
allocated to personal use must be compared on a case-by-case basis.

EXAMPLE 13: During the current year, Bill and Janice rent a dwelling
unit for 250 days, generating $35,000 of rental income, and have 30
days of personal use. The dwelling unit is used as a residence. Using
the Bolton method, the expense allocation is as follows:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------
Rental Income $35,000 $35,000
Interest 20,000 $6,301 (13,699) Bolton
Taxes 2,000 630 ( 1,370) Bolton
Utilities 3,500 $ 375 ( 3,125) 280A(e)(1)
Miscellaneous 2,000 214 ( 1,786) 280A(e)(1)
Depreciation 10,000 1,071 ( 8,929) 280A(e)(1)
-------
Net Rental Income $ 6,091
=======

Itemized deductions $ 6,931
=======


If Bill and Janice had only 25 days of personal use, the unit would
not be a residence. Using the IRS method, the expense allocation
would then be as follows:


Personal Personal Rental
Amount Amount Income/ Allocation
Total Allowed Disallowed Expense Method
----- -------- ---------- ------- ----------
Rental Income $35,000 $35,000
Interest 20,000 $1,786 (18,214) 280A(e)(1)
Taxes 2,000 $179 ( 1,821) 280A(e)(1)
Utilities 3,500 313 ( 3,187) 280A(e)(1)
Miscellaneous 2,000 179 ( 1,821) 280A(e)(1)
Depreciation 10,000 893 ( 9,107) 280A(e)(1)
-------
Net Rental Income $ 850
=======
Itemized deductions $ 179
=======


Bill and Janice should be indifferent to the choice between residence
and rental treatment, as the results are virtually identical.

TO CONTACT
wwwPaylesstaxcom

Call Toll Free for our assistance/help at: (877)CPA-Help or (877)272-4357.

Email your request for our assistance/help to: DonFitchCPA@paylesstax.com.

Website Contact Form  http://www.paylesstax.com/dfacontact.html

Video Conference with a CPA!

Fax your request for our assistance/help to: (760)836-0968 or (760)406-5001.

Chat Live with a CPA

Professional
 Services

www.Paylesstax.com's Favorite Accounting Links
 
www.Paylesstax.com's Favorite Tax Links
 
www.Paylesstax.com's Favorite IRS Links
 
www.Paylesstax.com's Favorite State Tax Links
 
www.Paylesstax.com's Favorite Tax Publisher & Research Links
 
www.Paylesstax.com's Favorite Computer Links
 
www.Paylesstax.com's Favorite Continuing Professional Education Links
 
www.Paylesstax.com's Favorite Library Links
 
www.Paylesstax.com's Favorite Internet Links
 
www.Paylesstax.com's Favorite Internet Purchasing Links
 
www.Paylesstax.com's Favorite Stock Market Links
 
www.Paylesstax.com's Favorite Travel Links

Professional Fees