Rental/Vacation Home Case
Tax Case 3
Individual Paper
2/22/2014
Attn: Dr. Ott
Executive Summary:
In this case, my group members represented the side of the taxpayer. One of the main issues in this case is whether or not Rex and Agnes Harrell should be able to make deductions in excess of rental income on their beach house. This deduction depends on if the 14-day personal use provision was exceeded. If the 14-day provision was exceeded than income should be limited to rental income as the ISR decided in this case. However, we have determined that the Harrell’s have not violated the 14-day provision and should therefore be allowed deductions for rental expenses exceeding rental income.
Facts:
The Harrell’s purchased a beach house to use occasionally for recreational purposes, but also to rent it out.
The house was in need of significant repairs so the couple decided to make the repairs themselves rather than hiring a contractor. Rex had taken advanced courses in woodwork at a local community college and he applied those skills in his maintenance work.
The log maintained by the Harrell’s showed that the couple occupied the house for 38 days and rented it out for 49 days. On 24 of the 38 days occupied, one or both of them were actively working on the beach house.
On the days they were working on the beach house they sometimes still had time for fun with their two teenage children. Some days they would only work 4 to 5 hours and be able to have fun while other days they would work 8 hours and not have time for fun.
The IRS has limited the deductions to rental income on the grounds that the 14-day personal use provision was exceeded.
Issues:
The main issues of this case are whether the Harrell’s exceeded the 14-day personal use provision, whether they can deduct rental expenses exceeding rental income, and whether or not the activities are engaged in for profit. Section 280A(d)(1) explains that the deductions are limited if the taxpayer’s personal use on the house exceeds
Individual Paper
2/22/2014
Attn: Dr. Ott
Executive Summary:
In this case, my group members represented the side of the taxpayer. One of the main issues in this case is whether or not Rex and Agnes Harrell should be able to make deductions in excess of rental income on their beach house. This deduction depends on if the 14-day personal use provision was exceeded. If the 14-day provision was exceeded than income should be limited to rental income as the ISR decided in this case. However, we have determined that the Harrell’s have not violated the 14-day provision and should therefore be allowed deductions for rental expenses exceeding rental income.
Facts:
The Harrell’s purchased a beach house to use occasionally for recreational purposes, but also to rent it out.
The house was in need of significant repairs so the couple decided to make the repairs themselves rather than hiring a contractor. Rex had taken advanced courses in woodwork at a local community college and he applied those skills in his maintenance work.
The log maintained by the Harrell’s showed that the couple occupied the house for 38 days and rented it out for 49 days. On 24 of the 38 days occupied, one or both of them were actively working on the beach house.
On the days they were working on the beach house they sometimes still had time for fun with their two teenage children. Some days they would only work 4 to 5 hours and be able to have fun while other days they would work 8 hours and not have time for fun.
The IRS has limited the deductions to rental income on the grounds that the 14-day personal use provision was exceeded.
Issues:
The main issues of this case are whether the Harrell’s exceeded the 14-day personal use provision, whether they can deduct rental expenses exceeding rental income, and whether or not the activities are engaged in for profit. Section 280A(d)(1) explains that the deductions are limited if the taxpayer’s personal use on the house exceeds