Real estate rental expenses
, total 118,418,343 136,837,282
* VACATION HOME RENTAL expenses
can be deducted in the following order: real estate taxes and interest expenses, operating expenses, rental activity direct expenses and depreciation.
Moody's expects, however, China Mobile's adjusted EBITDA margins will be largely stable, because operating lease rental expenses
are added back to EBITDA under Moody's adjustments.
280A also defines vacation home expenses and provides special rules that limit the rental expense
deductions that a taxpayer can take.
When a new home is subsequently purchased, the taxpayer must vacate the rental property and actually reside in the new home for it to qualify as his principal residence.(9) If the taxpayer is unable to sell the old principal residence before occupying the new one, the old residence may be rented out temporarily without causing it to lose its status as a principal residence(10); further, the taxpayer may deduct rental expenses
incurred without disqualifying the property.(11) However, if the taxpayer rented the residence for an extended period, a court might determine that it was no longer a former principal residence.(12)
1034, while also allowing depreciation and other rental expenses
incurred during the rental period.(17) The IRS did not contest the taxpayers' deduction of interest expense on Schedule A; at that time, the interest was deductible under Sec.
However, in Letter Ruling 9404016, the Service held that rents from a net lease of personal property were not deemed "passive investment income." The IRS determined that the taxpayer's large employee compensation and office rental expenses
amounted to substantial costs even though the rental was a net lease.
Depreciation (or "cost recovery" as it was termed in the Economic Recovery Tax Act of 1981 (ERTA)) is one of the first items to be considered when considering rental expenses
. Depreciation is "a reasonable allowance for the exhaustion, wear and tear (including a reasonable allowance for obsolescene) ...
Example: Taxpayer X has several rental properties with combined annual income and expenses as follows: Rental income $50,000 Rental expenses
(25,000) Depreciation (5,000) Net rental income $20,000