Question

Chris paid $100,000 for a single-family home on July 1, 2019, and immediately placed it in service as residential rental property. At the time, the land was valued at $10,000. The property generated $6,000 in rental income for the year. His only expenses consisted of depreciation and $500 in real estate taxes. Chris is not a real estate professional, but he does actively participate in his rental real estate activity. He has no other passive income or losses. What amount does Chris report for his total rental real estate and royalty income

Answer 1

Answer:

Total Rental real estate and royalty income $4,000

Explanation:

The computation of the total rental real estate and the royalty income is as follows;

For rental income and royalty

Cost of single family home $100,000

Less: Valuation of the land -$10,000

Value allocated to property 90,000

Multiplied by  Depreciation rate  1.667%

Depreciation Expense for 2019 $1,500

Rental Income 6,000

Less: Depreciation expense for 2019  -$1,500

Less: Real Estates taxes  -$500

Total Rental real estate and royalty income $4,000