You have a client (Olga) who has been with your firm for over 10 years. Last year, Olga told you her mother passed away. Since Olga is the only child of her mother and father and her father dies years before, she is the sole inheritor of all property for her mom. The property in question is her former house. After the estate sale, Olga shared her plans to turn it into a rental property.

When preparing her return for 2020, you notice that the tenant only paid about $1000 per month, on a house that is valued at around $750,000 and rents in that area are more around $3000. At the end of preparing her return, you notice that she has a $35,000 loss after all deductions. You ask her about this and she says, it is a rental property, but she is currently renting it to her son, who is attending college at a university near where her mom used to live.

Question(Tax memo)

1. Facts

2. Issue

3.Authorities(What IRS code section do you use?)

4.Conclusion

5.Analysis