Guido Ruggiero and Kristin Ruggiero - Page 22

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          and (e) of section 280A.  Sec. 280A(c)(3).  Section 280A(c)(5)              
          limits deductions attributable to the rental use of such a                  
          dwelling unit to an amount not to exceed the excess of the gross            
          rental income derived from the rental use over the sum of (1) the           
          deductions allocable to the rental use that are otherwise                   
          allowable regardless of such rental use (such as mortgage                   
          interest and real estate taxes) plus (2) any deductions that are            
          allocable to the rental activity in which the rental use of the             
          residence occurs, but that are not allocable to the rental use of           
          the residence itself.  See secs. 163 and 164.  Therefore, a                 
          taxpayer who rents a portion of a dwelling unit in which he or              
          she also resides during the taxable year must offset rental                 
          income first by expenses allocable to the rental use which are              
          otherwise allowable, such as mortgage interest and property                 
          taxes, and then, if any rental income remains, by other expenses            
          related to the rental activity.                                             
               Petitioners acknowledge that the Connecticut house is                  
          considered a "personal residence" under section 280A(d)(1),                 
          because petitioner Kristin Ruggiero lived there for 4 months                
          during the taxable year 1991.  Section 280A(a), therefore, is               
          applicable.  Where section 280A(a) is applicable to a dwelling              
          unit for a taxable year, the provisions of section 183 do not               
          apply to such unit for the year.  Sec. 280A(f)(3); see also                 

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