Miguel and Sofia Arroyo are married and live at $13071$ Sterling Drive, Marquette, MI $49866.$ Miguel is a self$-$employed insurance claims adjuster $($business activity code $524290),$ and Sofia is the dietitian for the local school district. They choose to file a joint tax return each year. Sofia's father Raul passed away January $8,2023.$

Name

Social Security

Date of Birth

Miguel Arroyo $112-11-111106/06/1978$

Sofia Arroyo $123-45-167808/14/1979$

One of the assets that Sofia inherited with the transfer of her father's estate was his house. Upon the advice of the financial consultant who shares office space with Miguel, the Arroyos decided to convert Raul$$s home into a furnished rental house. After several minor repairs $($e$.$g$.,$ touching up the paint on the interior walls, replacing various window screens, pressure washing the brick exterior, etc.$),$ the property was advertised for rent in the classified section of the local newspaper on March $1,2022.$ The repairs cost $$1,720,$ and the newspaper ad was $$360.$ Based on reconstructed records and appraisal estimates, information about the property is as follows:

Asset

Original Cost

FMV$,$ Jan. $8,2023$

House $$50,000$ $$360,000$

Land $15,00060,000$

Furniture and appliances $20,00015,000$

Raul$$s former residence was rented almost immediately, with occupancy commencing April $1,2032,$ under the following terms: one$-$year lease, $$2,650$ per month due the first day of the month, first and last months$$ rent in advance, $$2,500$ damage deposit, lawn care included but not utilities. The tenant complied with all terms except that she didn$$t pay the December rent until January $1,2024,$ because she was traveling internationally from Thanksgiving Day through New Year$$s Eve.

Expenses in connection with the property were as follows: property taxes, $$4,600$; repairs, $$820$; lawn maintenance, $$940$; insurance, $$2,800.$ The property is located at $12120$ Lake Road, Harvey, MI $49855.$

Prepare a Schedule E Page $1$ only and related Form $4562$ Page $1$ only.

Assume no bonus depreciation or Section $179$ depreciation is taken.