On November 15, Alex and Deanna Kent come to you for tax advice. The Kents, a married couple that files a joint tax return, own a rental home in Southern California. From January to November 1 of the current year, they rented out the home for 210 days. Since they live in Minnesota, they are considering staying in their rental home from December 10 to 31. If they do not stay in the home during that period, it will sit vacant. They ask you if this decision would have any tax consequences. They also provide you with the following information for the year:
Rental home income and expenses:
Rental income …………………………………………………….. $16,000
Mortgage interest ………………………………………………….. 12,400
Property taxes ……………………………………………………… 4,300
Homeowners Assoc. Fees ………………………………………… 3,500
Depreciation ………………………………………………………. 18,000
Other income and expenses:
Deanna’s salary …………………………………………………… 75,000
Alex’s salary ………………………………………………………. 65,000
Passive income (from an investment in a limited partnership) ……. 1,000
Mortgage interest on their Minnesota home ………………………… 7,800
Charitable contributions ……………………………………………. 14,200
Medical expenses …………………………………………………… 8,100
Property taxes on their Minnesota home …………………………… 2,900
State income taxes …………………………………………………. 9,700
What do you recommend to the Kents?