Ben and Krista purchased a rental property in 2018. The information for the property is below:

10 Bruckman Drive, Harrisburg, PA 17101 on July 1, 2018 for $95,000.

Sellers paid all of the closing costs and real estate fees.

Real Estate Taxes from July 1 December 31 = $3,250

Interest from Mortgage on Loan = $3,957

Rental Income from August 1 December 31 = $1,200 per month

Added Carpet on July 15, 2018 = $2,200

Added New Sidewalk on September 12, 2018 = $1,500

Added New Heating System on October 1, 2018 = $1,900

Added New Roof on November 1, 2018 = $7,500

Lawn Cutting and Snow Removal for 2018 = $350

Ben and Krista are managing the contractors, rental process, and tenants, since the rental property is near their current residence.

Ben started selling nutritional supplements to gyms at nights and weekends to bring home additional income. He decided not to incorporate and is considered a sole proprietor. The information for his new business is below:

Muscle Man Inc Commissions

48,000.00

EXPENSES

Tolls

958.00

Parking

560.00

Travel (Hotel & Airfare)

2,937.00

Cell phone

713.00

Meals and Entertainment

920.00

Office Supplies

1,350.00

Proposal Printing

9,125.00

Mileage

14,279 miles

Requirements:

Please prepare a letter to Ben and Krista Moore addressing their questions provided:

Question 1: Please describe in your letter how the profit / loss of the rental property will affect their current year income tax return and tax liability (increase / decrease and amounts). The Moore Family would like you to prepare a tax profit / loss calculation that will be included in their 2018 Federal Income tax Return for the Bruckman Drive rental property. Also, please prepare a schedule showing the Year 1, Year 2 and Year 3 depreciation for the rental property assets. They do not want Section 179 or Bonus depreciation for any assets in 2018.

Question 2: Please describe in your letter how the profit of the nutritional supplemental business will affect their current income tax return and tax liability (increase / decrease and amounts). Ben read something online about self-employment tax on his business income but needs clarification. Ben would like you to prepare a tax profit / loss calculation that will be included in their 2018 Federal Income Tax Return.

Question 3: Please include your fees for the tax research and letter in the last paragraph of your letter.