Dahlia Rents a Condo Owned by Bonnie

Dahlia rents a condo owned by Bonnie. Both individuals are cash basis taxpayers. Dahlia uses the condo as her personal residence. Dahlia pays Bonnie $1,000 monthly, and pays $1,200 on October 1st and April 1st of each year as part of the lease agreement. The $1,200 payments are made directly to the county treasurer for real estate property taxes. What is the income tax treatment of these events? I. Bonnie can deduct the $1,200 payments for adjusted gross income as a property tax. II. Bonnie includes the $1,000 monthly receipts in her gross income. III. Bonnie must include the $1,200 payments in her gross income. IV. Dahlia can deduct the $1,000 monthly payments from her adjusted gross income.

A) Only statement II is correct.
B) Only statements I, II, and IV are correct.
C) Only statement III is correct.
D) Only statements I , II, and III are correct.
E) Only statements II, III, and IV are correct.