Tax Case: Rachel And Brad Spartan Purchased A Beach House

Samah Alshaikh
Acc 352 – Fall 2014
Chapter 6 Research Problem
Day Class

Facts: Rachel and Brad Spartan purchased a beach house early 2011 to use it for recreational and rental purposes. Because the house was in a bad situation and needed a substantial repair, Rachel and Brad decided to repair the house themselves. After they completed the repair work, they occupied the house for 38 days during the year and rented it for 49 days. Among the 38 days, 24 days they were engaged in work on the beach house. Their two children were with them in the house, but they did not help them in the work. Because they considered the house as a rental property, Rachel and Brad filed their tax return and deducted the maintenance expenses, depreciation, and

tax court, Twohey v. Commissioner of Internal Revenue. Regarding the exact situation that Rachel and Brad are facing. Robert J. Twohey and Suzanne R. Twohey, husband and wife filed joint federal income tax returns for 1986 and 1987. They bought a vacation condominium which was in need for substantial repair in 1985. Thus, they decided to do the repairs themselves. They occupied the condominium for a total of 29 days during 1986 and 38 days during 1987, and they rented out the condominium for a total of 48 days during 1986 and 49 days during 1987. They spent 16 of the 29 days in 1986 and 24 of the 38 days in 1987 that they occupied the condominium engaged in work on the condominium. The issue was whether Twoheys used their condominium for personal purposes in excess of 14 days in either 1986 or 1987, and whether the repair expense were a capital expenditures and they should depreciate them rather than deduct them. The court found that Robert J. Twohey and Suzanne R. Twohey did not use the condominium for personal purposes in excess of 14 days in either 1986 or 1987 because according to Sec. 280A(c)(5) a taxpayer is considered to have used a vacation home as a residence if he uses the vacation home for personal purposes for a number of days which exceeds the greater of 14 days or 10% of the number of days during the year for which the property was rented. However, if the taxpayer is engaged in repair and maintenance of the