The Reverend Shaman Oracle is an ordained minister in the Church of Prophetic Prophecy in Palm Desert, California. In the current year, Shaman receives payments from the church for his services of $150,000. Of this amount, the church designates $60,000 for compensation and $90,000 as a housing allowance.

Shaman and his wife own a home and have actual expenditures during the year for the home of $72,000. The house is located in a wellestablished rental market, and the fair rental value of the home for the current year is $55,000. Shaman wants to know how he and his wife should report these amounts on their current year’s tax return. After appropriate research, write a letter to Shaman explaining your findings. His address is P.O. Box 1234, Palm Desert, California 92211.