Question

carly owns a rental house. her current tenant, korey, signed a two-year lease and moved into the house in january 2022. at that time, korey paid carly $1,500 for the first month's rent and $1,500 as a refundable security deposit. korey paid the $1,500 rent in cash on the first of each month during the year, except in november when he replaced the water heater in exchange for his rent. the water heater would have cost carly $1,300 to purchase and install. how much rental income must carly report for the tax year?

Answer 1

To determine Carly's rental income for the tax year, calculate the total rent received from Korey and subtract rent payments exchanged for services or repairs.

Step-by-step explanation:

To determine the rental income that Carly must report for the tax year, we need to calculate the total amount of rent received from Korey and subtract any rent payments that were exchanged for services or repairs.

Korey paid Carly $1,500 for the first month's rent and $1,500 as a refundable security deposit, totaling $3,000. For the remaining 10 months, Korey paid $1,500 per month, except in November when he replaced the water heater in exchange for his rent.

Since Carly would have spent $1,300 to replace the water heater, we can subtract this amount from the total rent received. Therefore, the rental income that Carly must report for the tax year is $14,200 ($3,000 + $1,500 x 10 - $1,300).