Amy owns a vacation cottage in Maine. She predicts that the time during which the...
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Accounting
Amy owns a vacation cottage in Maine. She predicts that the time during which the cottage will be used in the current year is as follows:
-By Amy, solely for vacation 12 days
-By Amy, making repairs ten hours per day and vacationing the rest of the day 2 days
- By her sister, who paid fair rental value 8 days
-By her cousin, who paid fair rental value 4 days
-By her friend, who paid a token amount of rent 2 days
-By three families from the Northeast, who paid fair rental value for 40 days each 120 days
-Not used 217 days.
Calculate the ratio for allocating the following expenses to the rental income expected to be received from the cottage: interest, taxes, repairs, insurance, and depreciation. The ratio will be used to determine the amount of expenses that are deductible and, thus, Amys taxable income for the year. For the tax manager to whom you report, prepare work papers in which you discuss the calculation method. Also, draft a memo to the file dealing with the results of your research
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