CFP Study Material

Correct answer: A. Rent and utility reimbursements are included in gross rental income; mortgage interest and repainting are generally deductible current expenses; hardwood flooring is a capital expenditure; claiming CCA may reduce current taxable income but could lead to recapture later.

“Choice A is true.” Gross rental income generally includes rent received and amounts paid by tenants on the owner’s behalf, such as utility reimbursements. Mortgage interest and repainting are typically curren…

Concepts

9.7.2 Rental Income for Investors

Gross rental income is the total amount you receive from renting a property. It includes rent and other amounts paid by tenants that relate to the rental arrangement, such as reimbursements for expenses that would otherwise be the landlord's responsibility.

A current expense is an expenditure that typically provides a benefit in the current period and is incurred to maintain or operate the rental property. You generally deduct current expenses in cal…

Your client, Jordan Bennett, owns a residential rental property. During the year, Jordan received monthly rent and a tenant’s reimbursement for utilities. Jordan also paid mortgage interest, repainted several rooms, and upgraded worn laminate flooring to hardwood. When reviewing the tax implications, Jordan asks how these amounts affect net rental income and whether claiming capital cost allowance (CCA) is beneficial.

What would you advise your client?

1. Rent and utility reimbursements are inc…

The CFP® Exam is challenging because the extensive knowledge tested is the accumulation of the content of as many as seven post-secondary courses, the length of the Exam is a grueling 6 hours, and your career may depend upon your passing of the Exam

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