In the year 2006, Jay Smith (336-55-1983) paid $125,000 for a condominium that he uses as a rental property. In 2011, he spent $36,000 furnishing the condo. He uses regular MACRS to depreciate the furnishings. In 2011, Jay deducted 50% of the cost of the furnishing as a bonus depreciation. The half year convention applies to the furnishings. During 2014, Jay received $15,000 in rental income and paid the following expenses:
Associations dues $1,800
Insurance $150
Mortgage Interest $6,460
Real Estate taxes $1,200
Repairs $760
Utilities $360
The property is located at 3906 East Far Lane #5, Santa Clara, CA 46883. Jay actively participates in the rental activity. His AGI before considering the above income and expenses is $141,400. He depreciates the condominium using MACRS.
Required:
• Prepare Schedule E for Jay.
• Prepare Form 8582 for Jay
Note: Prepare Schedule E and Form 8582.
Show your detailed calculation, particularly for depreciation.