The Cottage Street rental property originally purchased July 28, 2021, for $183,000, including land value of $13,000; original mortgage $164,700, 4.5%, 30-year fixed.

2. The property at 65 Cottage Street required significant renovation work of $41,700 for finishing the basement and a room addition. Assume all the work was completed at the beginning of September 2023. Evaluate the tax consequences of this expenditure.