Question 35 of 40.

For five years, Liam reported rental income and expenses from his rental house on Schedule E. However, he did not claim depreciation on the rental house. This year, Liam sold the rental home. Liam asks you to complete his tax return. You should tell Liam all of the following EXCEPT:

Liam's gain or loss on the sale is the sales price minus what he paid for the house.

Liam's basis in the rental home is reduced by the depreciation he should have taken to determine gain or loss.

Liam will have to pay tax at ordinary income rates on his gain from the sale up to the amount of depreciation he could have claimed.

Liam should file for a change in accounting method to claim catch-up depreciation on the property.