Benton Leases a Park City Condominium from Walnut Rental for $750

question 150

Multiple Choice

Benton leases a Park City condominium from Walnut Rental for $750 a month.Benton operates a carpet store in Park City.During October and November Benton does not make his monthly payments.Instead,Walnut allows him to replace the carpeting in another rental property of his instead of paying rent.What is Walnut's tax treatment of these events?
I.Walnut can capitalize the $1,500 and depreciate it.
II.Walnut can deduct the $1,500 as an operating expense.
III.Walnut includes the $1,500 in its gross income for the year.
IV.The $1,500 must be added to the basis of the condominium.
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• A)Statements II and III are correct.
• B)Statements I,II,and III are correct.
• C)Statements I and III are correct.
• D)Only statement II is correct.
• E)Only statement I is correct.

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Definitions:

Organic Halide

Organic compounds containing a halogen atom (fluorine, chlorine, bromine, or iodine) covalently bonded to carbon; utilized in various chemical syntheses and reactions.

Carboxylation

A chemical reaction that introduces a carboxyl group (-COOH) into a molecule.

Grignard Reagent

An organomagnesium compound used in organic chemistry for carbon-carbon bond formation, represented as RMgX where R is an alkyl or aryl group and X is a halogen.

Organic Halide

An organic compound containing one or more halogen atoms (fluorine, chlorine, bromine, or iodine) covalently bonded to carbon.