1. Bill and Ann have a rental house. On June 1 they rented the house to a new tenant, Alice. Alice paid them the following fees: First months rent $1,200 Security deposit (which will also be the last months rent) $1,200 Pet security deposit (returned when Alice moves out) $300 Which of the following is correct? a) Bill and Ann must report $2,700 as income this year. b) Bill and Ann must report $1,200 as income this year. c) Bill and Ann must report $2,400 as income this year. d) Bill and Ann must report $1,500 as income this year.

2. Louis receives rental income from three rental houses. In 2018 he did repairs and maintenance on the houses and also made some improvements. He did the following work on the rental properties this year: Repaired three driveways $ 600 Installed siding on a house $ 6,000 Replaced broken windows $ 450 Installed new counter tops $ 3,000 Paint interior of a house $ 950 Replaced a deck $ 2,000 Cleaned and repaired gutters $ 400 Installed new kitchen cabinets $ 8,000 Replace roof shingles $ 750 What amount of expenses will Louis be able to deduct in full this year? a) $22,150 b) $ 3,150 c) $20,150 d) $ 0