In year 1 JP purchased a large single-story residential property. He paid $300,000 with $100,000 attributable to the value of the land, other aquisition costs are already factored into the price. Financial activity associated with the house for each year: Property tax of $12,000 yearly Insurance $1,200 yearly Mortgage interest $12,000 yearly Maintenance $1,200 yearly Utilities $2,400 yearly New roof in year 3 $10,000 one-time expense Christmas decorations $100 one-time expense December year 2 Purchase of furniture for rental room $1,200 one-time expense January year 2 Explain the tax consequences and tax rules for the following scenarios. Each scenario is mutually exclusive, meaning unless specifically indicated, a previous scenario should not affect a subsequent scenario. Be sure to provide the answer to the problems by showing the calculations as well as explaining the rules affecting the activity. Where a question is unclear or ambiguous, explain the ambiguity and answer the question.

JP rented one room at the house to a friend for 12 months during year 2. The room encompassed 10% or the total square footage of the house.

The monthly rent was $100. What are the implications of the room rental?

How would your answer to scenario 1 change under these circumstances?