Brad and Kate received $9,500 for rent from Mike and Janet,who are renting their home in Santa Ana,California.Brad and Kate did not use this property for personal use.The rent covers eight months from August 1 of the current year to March 31 of the following year.The amount also includes a security deposit of $1,500.How much should Brad and Kate report as rental income in the current tax year?
A)$1,500
B)$5,000
C)$8,000
D)$9,500

Question

Quizplus · Accepted Answer

Brad and Kate should report as rental income the amount received for the eight months of rent, which is $8,000 ($9,500 - $1,500 security deposit). The security deposit is not counted as rental income because it is expected to be returned to the tenants at the end of the lease. Therefore, choices A, B, and D are incorrect.

Brad and Kate Received $9,500 for Rent from Mike and Janet,who