In this tax topic you will learn how to report rental income
and expenses on tax returns, the expenses you are allowed to deduct. Amongst the
items you will become aware of here, are the rental-for-profit activities in
which there is no personal use of the property. In addition, you will learn
about taking depreciation as it applies to rentals and how to claim the correct
amount. Finally, you will also become aware of the rules for rental income and
expenses when there is also personal use of the property, such as with vacation
homes.
Student Instructions: Complete the following 3 steps:
-
Read the reading material and
answer the questions on this page.
-
Assignment Pending...Submit the answers to the
Assignment
online (the questions on this page).
Scroll down for all questions on this page. When you are ready to
submit click on the Assignment link. (These
questions may appear again on the quiz online).
-
Complete a quiz on the
reading material:
Quiz
Online. You have 60 minutes
to complete 40 questions for this quiz. You must
study the reading material. You won't have time to look up questions in the
reading material. If you don't pass, you can retry only after 24 hours have
passed. - Every time
you try the questions will be different. You will be disqualified from
completing this topic if you do not allow the proper 24 hours in
between tries. If you are disqualified, you will notified through email of
the substitute topic to complete.
Important:
If you fail a topic you can
try again until you pass. However, you cannot try that same quiz or assignment again until 24
hours later. This will give you enough time to study and review the reading
material.
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Material needed to complete the
sections in this assignment
Use
IRS Publication 527,
Schedule A instructions,
Schedule E instructions
and
Form 1040 Instructions
(Form 1040 instructions only up to page 98)
to complete this tax topic.
Please note:
Form 1040 Instructions
(Form 1040 instructions only up to page 98) will be used for the rest of the topics in the initial tax
preparer certification course. You will be responsible to answer questions from
the Form 1040 instructions booklet (up to page 98) on every topic so read it carefully.
Tax Return Situation 1:
Prepare
Form 1040,
Form 4562, Schedule A,
Schedule E.
Teresa is single and has no children.
In August, 2009, Teresa
moved in with her mother to keep her company. Instead of
selling the condo she had been living in, she decided to convert it to rental
property. Teresa selected her tenant and started renting the condo on September
1st. Teresa charges $800 per month for rent and collects it herself. Teresa
received an $800 security deposit and $800 last months rent from her tenant. She
plans to return the security deposit to her tenant at the end of the lease but
not until doing an inspection on the condition of the condo. She actively
participated in the rental activities. She had advertised and rented the condo
to the current tenant herself. She also collected the rents. All repairs
were contracted by Teresa.
Her condo expenses for the 2009 tax year are:
|
Mortgage interest |
$8,500.00 |
|
Fire insurance (1-year policy) |
$350.00 |
|
Miscellaneous repairs (after renting) |
$200.00 |
|
Real estate taxes imposed and paid |
$1,300.00 |
|
Advertising |
$480.00 |
| |
|
Teresa bought this property in 1985 for $35,000. Her property tax was based
on assessed values of $10,000 for the land and $25,000 for the condo. Before
changing it to rental property, Teresa had the following work done to the condo:
|
Remodeled kitchen |
$4,200 |
|
Added a recreation room |
$5,800 |
|
New roof |
$1,600 |
|
Patio and deck |
$2,400 |
| |
|
On September 1, 2009, when Teresa changed her
1 bedroom condo to rental
property, the property had a fair market value of $92,000 ($20,000 land and $72,000 building).
Property is located at 6109 Sunnyslope Drive, Kansas City, Missouri, 64134.
All her information on
the W-2 is current, including address information.
|
