Problem 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, 2021 Name Social Security Date of Birth Miguel Arroyo 112 11 1111 06 06 1978 Sofia Arroyo 123 45 1678 08 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 Rauls 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, 2021 The repairs cost $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, 2021 House $40,000 $220,000 Land 10,000 50,000 Furniture and appliances 21,000 14,000 Rauls former residence was rented almost immediately, with occupancy commencing April 1, 2021, under the following terms one year lease, $2,400 per month due the first day of the month, first and last months rent in advance, $2,000 damage deposit, lawn care included but not utilities The tenant complied with all terms except that she didnt pay the December rent until January 1, 2022, because she was traveling internationally from Thanksgiving Day through New Years Eve Expenses in connection with the property were as follows property taxes, $2,600 repairs, $320 lawn maintenance, $540 insurance, $1,800 The property is located at 12120 Lake Road, Harvey, MI 49855 Assume 365 fair rental days make notes to research and confirm treatment of rents and other payments, expenses associated with rental properties, rental use, depreciation, and basis for inherited property Prepare a Schedule E Page 1 only and related Form 4562 Page 1 only Assume no bonus depreciation or Section 179 depreciation is taken Materials Schedule E Form 4562 Form 4562

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 20, 2024

Problem 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

Problem

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, 2021.

Name	Social Security	Date of Birth
Miguel Arroyo	112-11-1111	06/06/1978
Sofia Arroyo	123-45-1678	08/14/1979

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 Rauls 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, 2021. The repairs cost $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, 2021
House	$40,000	$220,000
Land	10,000	50,000
Furniture and appliances	21,000	14,000

Rauls former residence was rented almost immediately, with occupancy commencing April 1, 2021, under the following terms: one-year lease, $2,400 per month due the first day of the month, first and last months rent in advance, $2,000 damage deposit, lawn care included but not utilities. The tenant complied with all terms except that she didnt pay the December rent until January 1, 2022, because she was traveling internationally from Thanksgiving Day through New Years Eve.

Expenses in connection with the property were as follows: property taxes, $2,600; repairs, $320; lawn maintenance, $540; insurance, $1,800. The property is located at 12120 Lake Road, Harvey, MI 49855.

Assume 365 fair rental days.

make notes to research and confirm treatment of rents and other payments, expenses associated with rental properties, rental use, depreciation, and basis for inherited property.

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

Assume no bonus depreciation or Section 179 depreciation is taken.

Materials:

Schedule E

Form 4562