Dahlia Rents a Condo Owned by Bonnie

question 43

Multiple Choice

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 1^st and April 1^st 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.
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• 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.

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