Conrad purchases a condominium in Aspen, Colorado. Because of his hectic work schedule, Conrad is unsure how much he will be able to use the condo over the next few years. A friend of his who has a condo in Aspen tells him that the condominium is both a great investment and an excellent tax shelter. Conrad's friend has been able to rent his condominium for $1,000 per week. Conrad expects to incur the following expenses related to the condominium:
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Home mortgage interest
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$16,000
|
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Real property taxes
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5,500
|
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Insurance
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825
|
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Utilities
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2,150
|
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Condominium fee
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2,400
|
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Maintenance
|
300
|
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Depreciation (unallocated)
|
6,500
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Conrad is somewhat hesitant to rent his new condo out for the entire year, just in case he can sneak away from work for a few days. Therefore, he wants to explore all his options. Explain the different tax treatments of his condominium expenses depending on the number of days he uses it.