Jose, an unmarried individual who is a citizen and resident of Brazil, owns a shopping center in Chicago. He leases the mall to an unrelated domestic corporation, which subleases store spaces to merchants.

The lease entitles Jose to rents of $1,000 per month and also requires that the lessee make Jose’s payments on the mortgage on the center ($2,000 per month) and pay real property taxes on the center ($6,000 for the current year).

For the current year, the $24,000 in mortgage payments consist of interest of $16,000 and principal of $8,000. Depreciation deductions on the shopping center, if allowable, are $35,000 each year.

Explain Jose’s U.S. tax situation under both of the following scenarios.

A.He does NOT make the election under section 871(d).

B.He makes the election under 871(d).

Answer rating: 100% (QA)

A He does NOT make the election under section 8 71 d ANS WER If Jose ... View the full answer