Edison and Hermes are siblings; they each have an equal ownership interest in a residential rental property they inherited from their father. How do Edison and Hermes report the rental income and expenses for this property on their individual returns? 1. They must each report their proportionate share of rental income and expenses every year on separate Schedules E. 2. They should take turns reporting the rental income and expenses in alternate tax years. 3. They must determine which of them will report the rental income and expenses by December 31 of the tax year. 4. They should proportionately allocate the rental income and expenses in the manner offering the most favorable tax outcome