Question

1. Ron Remy enters into a three-year lease to rent his property. In the first year, in addition to $9,600 for the year's rent, he received $1,600 in advance as rent for the last two months of the lease and $800 as a security deposit which he plans to return to the tenant at the end of the lease. What amount must be reported as income by Ron?

2. B received a salary of $27,000 before he retired in October of this year. After he retired, he received Social Security benefits of $3,000 during the year. What amount, if any, of his Social Security benefit is taxable.

3. Art Aubrey owns and operates an apartment building. During 2018, he received the following:

Payment on 6/1/18 for 12 months of advance rent	$4,800
Monthly rent payments	43,200
Security deposits to be returned to tenants at end of lease	3,000
Payments for cancelling a lease	400
Deductible maintenance rental expenses paid by tenants	600

What is Art's gross rental income?

Answer 1

1

Rental income = 9,600 + 1,600 = 11,200

2

Taxable social security benefits are 1,500 (calculated using irs provided worksheet below)

Sl No	Particulars	Amount
1	Total amount of social security income	3,000
2	One half of line 1	1,500
3	Total of taxable items on form 1040 except social security income	27,000
4	Enter the amount of tax-exempt interest income	-
5	Add lines 2,3 and 4	28,500
6	Enter all adjustments for AGI except for student loan interest, domestic production activities deduction and the tuition and fees deduction	-
7	Subtract line 6 from line 5. If zero or less stop here, none of the social security benefits are taxable	28,500
8	Enter 25,000 (32,000 is married filing jointly; 0 if married filing seperately and living with spouse at any time during the year)	25,000
9	Subtract line 8 from line 7. If zero or less, enter -0-. Note: if line 9 is zero or less, stop here. None of your benefits are taxable. Otherwise go to line 10.	3,500
10	Enter 9,000 (12,000 is married filing jointly; 0 if married filing seperately and living with spouse at any time during the year)	9,000
11	Subtract line 10 from line 9. If zero or less, enter -0-	-
12	Enter the smaller of line 9 or line 10	3,500
13	Enter one half of line 12	1,750
14	Enter the smaller of line 2 or line 13	1,500
15	Multiply line 11 by 85%	-
16	Add lines 14 and 15	1,500
17	Multiply line 1 by 85%	2,550
18	Taxable benefits. Enter the smaller of line 16 or line 17	1,500

3

Particulars	Amount
Advance rent	4,800
Monthly rent	43,200
Returnable deposits	-
Cancelling lease	400
Expenses paid by tenant	600
Gross rental income	49,000