We're doing some problems for our yearly tax courses and I'm having problems determining the answer to the following scenerio. It has to do with land and depreciation. I know you can't depreciate land but the boulder removal has me stumped and reading the IRS rules doesn't make it clear if depreciation is allowd. The answer in parenthesis is what I think the answer would be if depreciation is allowed. Anyone want to do weigh in or give me some help?
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Cassandra Martini (age 49, born 01-28-1958, SSN 400-00-1803) is single. Cassandra owns a vacant piece of land in Vistoe, Colorado, that she rents. Cassandra bought the land on August 21,1999, for $18,000, and began renting it December 14, 2002. In January, she paid $500 to have some large boulders removed, and she paid real estate taxes of $450. Cassandra flew to Vistoe to inspect the property and negotiate a new lease. She received $1,000 upon signing, which represented $500 rent for the fi rst year and $500 to be held for the last year?s rent. Her airfare was $305, the motel was $89, and her meals were $48.
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- What is the total amount of rent on Sch E line 3? a. 1,000
- What are the expenses, excluding depreciation, Cassandra has for the land on Sch E Line 19? a. 1,344 (844)
- What is the total depreciation expense Cassandra can claim on Sch E Line 20? a. 0 (17)
- What amount of rental income or loss is reported on Form 1040 Line
Thanks for any help.