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Nikola purchased a rental house for $80,000 with land value of $15,000. Before making the house available for rent, Nikola remodeled the bathroom, She installed a new vanity, fixtures, and flooring at a cost of $3,000. She also painted the existing walls and repaired the linen closet door at a cost of $550. How are these expenses reported? $3,000 is capitalized and recovered through depreciation over 271/2 jears, while $550 is deducted as a repair on Schedule E, line 14 . $3,550 is added to the basis of the property and recovered through epreciation over 271/2 years. $3,550 is reported as an investment interest deduction on schedule A. $3,550 is deducted as an expense on Schedule E, line 14