A Memo On Tax System

This memo describes the tax rules on the income of renting a home. Under the tax laws on the residential rental property, the rental income and expenses are divided into several categories depending on the use of the property. The two uses of a property can be personal and rental uses whereas the nature of the use of property also provides an insight to the tax rules. As the client is eager to buy a house where they intended to use it for the summers while rent it for the rest of the year. This implies that the use of property is both a personal and a rental use. In order to determine the actual income tax on the rent from the house also in personal use, the category of the tax law must be described.

The category for such kind of income tax is presented in the section of Personal use of Dwelling Unit along with Vacation Home. The first thing the tax laws seek to establish is the nature of the unit i.e. the property which is in case a home. The law suggests that the establishment of the dwelling unit to be a home is essential because the amount which can be deducted as the rental expense would be limited in case of the dwelling unit as home. According to the law, the dwelling unit is also defined as a unit including a house, condominium, apartment, vacation home, mobile home, boat, or similar property. More specifically a dwelling unit would have all necessary living accommodations like toilet, sleeping space and facilities like cooking etc.

A Memo On Tax System Submitted By: Date: To: From: Date: Subject: Vacation Home This memo describes the tax rules on the income of renting a home. Under the tax laws on the residential rental property, the rental income and expenses are divided into several categories depending on the use of the property. The two uses of a property can be personal and rental uses whereas the nature of the use of property also provides an insight to the tax rules. As the client is eager to buy a house where they intended to use it for the summers while rent it for the rest of the year. This implies that the use of property is both a personal and a rental use. In order to determine the actual income tax on the rent from the house also in personal use, the category of the tax law must be described. The category for such kind of income tax is presented in the section of Personal use of Dwelling Unit along with Vacation Home. The first thing the tax laws seek to establish is the nature of the unit i.e. the property which is in case a home. The law suggests that the establishment of the dwelling unit to be a home is essential because the amount which can be deducted as the rental expense would be limited in case of the dwelling unit as home. According to the law, the dwelling unit is also defined as a unit including a house, condominium, apartment, vacation home, mobile home, boat, or similar property. More specifically a dwelling unit would have all necessary living accommodations like toilet, sleeping space and facilities like cooking etc. The first thing to do when you are using a dwelling unit for both personal and rental uses, you need to divide the expenses according to the personal and rental uses, as the number of days the house unit is being used for personal use and the number of days the dwelling unit is being used for rental objectives. The division of expenses is not straight forward as it seems, in order to divide the expenses; a few rules should be followed. The day when the unit i.e. home is rented even though it is used for personal purposes would be included in the rental expenses. On the other hand, this rule does not hold for personal use of the unit. The other rule for dividing expenses suggests that the any given day if the unit is available for rent but it is not rented would include in the division. The first rule of this law holds when the unit is rented on a reasonable rental price. The reasonable rental price is also described in the law, which is the amount a person is willing to pay as rent but this person should not be related to the owner. Another exception for the personal use of the unit is days of repair and maintenance. This implies that the days spent on the working for the unit and more specifically for the repairing and maintenance purposes should not be included in the personal use of the house unit. The rule holds even if the family uses the unit for recreational objective on the same day. As the client is intended to spare the unit i.e. home for more than fifteen days for rental use therefore the rule of minimal rental use is not applied. The allowable rental expense in this case would be based on a few steps. First the total days of availability for rent at a fair rental price should be determined. In addition, the total days available for rent but has not been rented the unit should be illustrated. The difference between these two would provide the total days of rental use. The all days of personal days should be illustrated as discussed in the division of expenses section. Adding the two would provide days for rental and personal use. Dividing the days of rental use by the total days of persona and rental use would provide the rental use percentage. Upon this value the tax rate would be applied and tax is deductible. Regard

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Category Customer Relationship Management
Paper Type APA
Reference Type Management
Words 698

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