Chapter 2: Income Tax Concepts
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that the primary motive for the expenditure must be profit related. In this case, the cabin is used for both investment purposes (the production of rents) and for personal purposes (Doris' vacation). Therefore, the cabin is a mixed-use asset that will have to be accounted for as two assets - the investment portion and the personal use portion. Expenditures related to personal use are not deductible (other than allowable itemized deductions for interest and taxes). The expenditures related to the production of rental income are deductible, but may be limited. A primary problem in such a circumstance is whether the primary purpose of purchasing the cabin is investment related or personal. In Chapter 5, the tax law definitions for making this determination are discussed.
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